Question
In: Finance
Brooker Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Brooker Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information. (1) The firm's bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. (2) The company’s tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock’s beta is 1.20. (4) The target capital structure consists of 35% debt and 65% common equity. The firm uses the CAPM to estimate the cost of equity. What is its WACC?
|
7.16% |
||
|
7.54% |
||
|
7.93% |
||
|
8.35% |
||
|
8.79% |
Solutions
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