A firm has 2,000,000 shares of common stock outstanding with a market price of $2 00 each It has 2,000 bonds outstanding, each with a market value of $1,200 (120 percent of face) The bonds mature in 15 years, have a coupon rate of 10 percent, and pay coupons annually The firm 's beta is 1 2, the risk free rate is 5 percent, and the market risk premium is 7 percent The tax rate is 34 percent Compute the WACC a) 5 42 percent b) 6 53 percent c) 9 36 percent d) 10 28 percent

Question: A firm has 2,000,000 shares of common stock outstanding with a market price of $2.00 each. It has 2,000 bonds outstanding, each with a market

A firm has 2,000,000 shares of outstanding with a market price of $2.00 each. It has 2,000 bonds outstanding, each with a market value of $1,200 (120 percent of face). The bonds mature in 15 years, have a rate of 10 percent, and pay coupons annually. The firm's beta is 1.2, the risk free rate is 5 percent, and the market risk premium is 7 percent. The tax rate is 34 percent. Compute the WACC.
a) 5.42 percent
b) 6.53 percent
c) 9.36 percent
d) 10.28 percent

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