The company had pre-tax net income of $25mm last year and paid taxes of $10mm. The company has $900mm of total liabilities, $100mm of accounts payable, and $500mm of long-term debt. The company has 120mm shares authorized, 45mm shares issued, and 5mm shares of treasury stock. The stock now trades at $35 per share. the 10 year Treasury rate is 3% The pre-tax cost of debt is 6% The company’s Beta is 2 and the market return for equities is 8%. What is the WACC?

The company had pre-tax net income of $25mm last year and paid taxes of $10mm. The company has $900mm of total liabilities, $100mm of accounts payable, and $500mm of long-term debt. The company has 120mm shares authorized, 45mm shares issued, and 5mm shares of treasury stock. The stock now trades at $35 per share. the 10 year Treasury rate is 3% The pre-tax cost of debt is 6% The company’s Beta is 2 and the market return for equities is 8%. What is the WACC?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 2P

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