• 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? SOLUTION
a. 9.71% b. 9.66% c. 8.31% d. 11.18% e. 11.10%
