Here is some information about Stokenchurch Inc.:   Beta of common stock = 1.5 Treasury bill rate = 4% Market risk premium = 6.8% Yield to maturity on long-term debt = 9% Book value of equity = $370 million Market value of equity = $740 million Long-term debt outstanding = $740 million Corporate tax rate = 21%   What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 14PROB
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Problem 13-2 WACC (LO1)

Here is some information about Stokenchurch Inc.:

 

Beta of common stock = 1.5

Treasury bill rate = 4%

Market risk premium = 6.8%

Yield to maturity on long-term debt = 9%

Book value of equity = $370 million

Market value of equity = $740 million

Long-term debt outstanding = $740 million

Corporate tax rate = 21%

 

What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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why is the debt only 1 and not 1.5 

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