Fin 221 Spring 2006
5. Billick Brothers is estimating its WACC. The company has collected the following information: ? Its capital structure consists of 40 percent debt and 60 percent common equity. The company has 20-year bonds outstanding with a 9 percent annual coupon that are trading at par. ? The company’s tax rate is 40 percent. ? The risk-free rate is 5.5 percent. ? The market risk premium is 5 percent. ? The stock’s beta is 1.4. What is the company’s WACC? CLICK HERE FOR SOLUTION
