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Firm A is a well-established medium size firm. It has $600 million of market value...

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Finance

Firm A is a well-established medium size firm. It has $600 million of market value of equity and $300 million of debt. Treasury bills that mature in one year yield 4 percent per year, and the expected return on the market portfolio is 10 percent. The beta of Firm As equity is 1.5.

Solve the following questions (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

Assuming no tax rate, solve the following two questions:

Q1 (4pts) What is the firms WACC?

Q2 (4 pts ) What is Firm As unlevered cost of equity capital? (You should use MMs proposition II to solve the question)

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