You are tasked with estimating the cost of capital for a firm. The risk$-$free rate is $4\mathrm{.}7\%,$ the expected rate of return on the market is $10\mathrm{.}7\%.$ Now, another similar company $($similar unlevered cost of capital$)$ has a debt$-$to$-$equity ratio of $1$ to $2.$ It has a debt beta near zero and an equity market$-$beta of $1\mathrm{.}5.$ Your own firm has more debt, for a debt$-$to$-$equity ratio of $1$ to $1,$ with a debt beta of $0\mathrm{.}3.$ What is a good estimate for your firm's cost of capital $($WACC$)?$

Answer rating: 100% (QA)

To estimate the weighted average cost of capital WACC for your firm we need to calculate the cost of ... View the full answer