A company, Wintershield, is planning a $50m expansion, with a life of 16 years. The company...

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A company, Wintershield, is planning a $50m expansion, with a life of 16 years. The company carries a BBB credit rating. The expansion is to be financed by selling $20m in new debt, $15m in new common stock, and $15m in preferred equity. The following information is collected by an analyst trying to compute the WACC of the expansion project. • Company Gamma, a BBB rated company has a before tax of debt required return on debt of 15 years to maturity is 9%. The tax bracket of the company is 30% • Company Alpha, a BBB rated company has a before tax of debt required return on debt of 20 years to maturity is 12%. The tax bracket of the company is 25%. Wintershield has preferred stock that pays a $5 dividend per share and sells for $ 50. • The risk free rate is 5%. • The risk premium between equity and bond yield is found to be 4%. Beta is 1.5 Find the WACC. A company, Wintershield, is planning a $50m expansion, with a life of 16 years. The company carries a BBB credit rating. The expansion is to be financed by selling $20m in new debt, $15m in new common stock, and $15m in preferred equity. The following information is collected by an analyst trying to compute the WACC of the expansion project. • Company Gamma, a BBB rated company has a before tax of debt required return on debt of 15 years to maturity is 9%. The tax bracket of the company is 30% • Company Alpha, a BBB rated company has a before tax of debt required return on debt of 20 years to maturity is 12%. The tax bracket of the company is 25%. Wintershield has preferred stock that pays a $5 dividend per share and sells for $ 50. • The risk free rate is 5%. • The risk premium between equity and bond yield is found to be 4%. Beta is 1.5 Find the WACC.

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC for Wintershields expansion project we need t... View the full answer