A. Suppose stock in Watta Corporation has a beta of .80. The market risk premium is 6

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Suppose stock in Watta Corporation has a beta of .80. The market risk premium is 6 percent, and the risk-free rate is 6 percent. Watta's last dividend was $1.20 per share, and the dividend is expected to grow at 8 percent indefinitely. The stock currently sells for $45 per share. What is Watta's cost of equity capital?

Calculating the WACC In addition to the information given in the previous problem, suppose Watta has a target debtequity ratio of 50 percent. Its cost of debt is 9 percent before taxes. If the tax rate is 35 percent, what is the WACC?

Under what conditions is it correct to use the WACC to determine NPV?

Posted Date: May 19, 2024 03:03 PM

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A. Suppose stock in Watta Corporation has a beta of .80. The market risk premium is 6

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