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A company has $107 million in outstanding bonds, and 10 million shares of stock currently trading...

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Finance

A company has $107 million in outstanding bonds, and 10 millionshares of stock currently trading at $40 per share.The bonds pay anannual coupon rate of 5% and is trading at par. The company's betais 1.2, its tax rate is 40%, the risk-free rate is 3%, and themarket risk premium is 4%. What is this firm's WACC?

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4.2 Ratings (622 Votes)
Firms Weighted Average Cost of Capital WACC Market Value of each capital Structure Market Value of Debt 107 Million Market Value of Equity 400 Million 10 Million shares x 40 per share Total Market Value 507 Million Weights    See Answer
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A company has $107 million in outstanding bonds, and 10 millionshares of stock currently trading at $40 per share.The bonds pay anannual coupon rate of 5% and is trading at par. The company's betais 1.2, its tax rate is 40%, the risk-free rate is 3%, and themarket risk premium is 4%. What is this firm's WACC?

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