5.

value: 6.66 points

Required information

ABC Corporation has the following information:

Total market value of a companys stock: $650 million

Total market value of the companys debt: $150 million

Cost of Equity: 10%

Cost of Debt: 8%

Corporate tax rate is 35 percent

What is the WACC of ABC Corporation?

8.125%

9.10%

9.75%

10.05%

10.50%

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6.

value: 6.66 points

Required information

ABC Corporation has 2.8 million shares of stock outstanding. The stock currently sells for $50 per share. The firms debt is publically traded and was recently quoted at 95 percent of its face value. It has a total face value of $10 million, and it is currently priced to yield 12 percent. The risk-free rate is 5 percent, and the market risk premium is 7 percent. Youve estimated that ABC has a beta of 1.25. If the corporate tax rate is 35 percent, what is the WACC of ABC Corporation?

9.38%

10.88%

11.38%

12.88%

13.38%

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