You are valuing a potential take-over target, a private sports shoe manufacturer. Let's walk through some important questions.

1) Your colleague collects the information in Table 1. Included are D/E ratios and estimated equity betas for firms similar to the take-over market, the target firm's Debt-to-Firm Value ratio, the target firm's tax rate, and the average YTM and coupon payments for their outstanding debt. Using this data, find the appropriate WACC for this investment decision.

	D/E	Equity Beta		Target D/V	20%
Competitor 1	29.90%	2.68		Tax Rate	40%
Competitor 2	-7.60%	1.94		Average YTM	6%
Competitor 3	32.20%	1.92		Average Coupon	6.50%
Competitor 4	49.70%	1.12		Equity Market Risk Premium	5%
Competitor 5	21.70%	0.97		Treasury Note	4.93%
Competitor 6	34.30%	2.13
Competitor 7	28.50%	1.27
Competitor 8	-6.70%	1.01
Competitor 9	42.60%	0.98

Answer rating: 100% (QA)

Target DV 02 Target EV 1Target DV 102 08 Target DE Target DV Target EV 0208 25 Since Target DE is ... View the full answer