Atlas Corp is a privately-held firm with an estimated market value-based D/E = 0.22 and a 6.5% cost of debt capital. The firm’s tax rate is 35%. You have identified a comparable firm that has an equity beta of 2.15, a D/E ratio of 0.80, an expected 7.0% cost of debt, and a 30% marginal corporate tax rate. If the risk-free rate is 4% and the market risk premium is 4.2%, what is your estimate of Atlas’s weighted average cost of capital (WACC)?

Answer rating: 100% (QA)

To calculate Atlas Corps weighted average cost of capital WACC we need to determine the cost of equi... View the full answer