You were recently hired as a consultant to estimate the weighted average cost of capital (WACC) at Rebel Supply Company. You have obtained the following information:

a.)  The firm's semi-annual bonds mature in 20 years, have a 7.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. 

b.)  The risk-free rate is 3.0%, the market risk premium is 5.5%, and the stock's beta is 1.30. The firm uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock.

c.)  The target capital structure consists of 45% debt and 55% common equity. The company's tax rate is 40%. 

What is the firm's weighted average cost of capital (WACC)?

Answer rating: 100% (QA)

Ans To calculate the weighted average cost of capital WACC youll need to determine the cost of debt ... View the full answer