Question: As a financial analyst you are comparing Alpha and Beta companies Alpha - Information from the Balance Sheet Current Assets $2,000,000 Long Term Assets $7,000,000

As a financial analyst you are comparing Alpha and Beta companies

Alpha - Information from the Balance Sheet

  • Current Assets $2,000,000
  • Long Term Assets $7,000,000
  • Current Liabilities $1,000,000
  • Long Term Liabilities $5,000,000
  • Shareholders Equity $3,000,000

Beta - Information Market Data

Bonds Outstanding 3,000 units selling at $980

Common Stock Outstanding 260,000 shares selling at $23.40

Required

If the after-tax cost of debt is 8% for both companies and the cost of equity is 12% which company has the highest WACC?

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