Watergate has a beta of 1.25. The market risk premium is 10% and the risk-free rate is 2.5%. ABC Corp. has 1 million outstanding bonds trading at $100 currently. ABC Corp. has 20 million shares outstanding trading at $20. What is the weighted average cost of capital for ABC Corp. if the yield to maturity of its bond is 10%? Assume that the corporate tax rate is 0%.

Answer rating: 100% (QA)

SOLUTION To calculate the weighted average cost of capital WACC for ABC Corp we need to calculate th... View the full answer