1. Calculate the WACC for this firm:
   • 30% is financed with debt and the remaining financed with equity
   • Cost of debt is 5%
   • Risk free rate is 2%
   • Expected market return is 8%
   • Beta of "AAA" stock is 1.10
   • Tax rate is 30%
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Sales Cost of Goods Sold INCOME STATEMENT 2021 $18,000.00 $9,720.00 Selling and General Expenses Depreciation Interest Expense Income Before Taxes $5,400.00 $602.50 $295.00 $1,982.50 Income Taxes Net Income $495.63 $1,486.88 Retained Earnings, Beg $2,145.00 Add: Net Income $1,486.88 Less: Dividends $446.06 Retained Earnings, End $3,185.81 BALANCE SHEET 2021-12-31 ASSETS Cash $165.81 Accounts Receivable $3,380.00 Inventory $4,460.00 Total Current Assets $8,005.81 Fixed Assets At costs $12,050.00 Cumulated depreciation $3,560.00 Fixed assets (net) $8,490.00 Total Assets $16,495.81 LIABILITIES + EQUITY Accounts Payable $4,080.00 Other current liabilities $675.00 Total Current Liabilities $4,755.00 Sales Cost of Goods Sold INCOME STATEMENT 2021 $18,000.00 $9,720.00 Selling and General Expenses Depreciation Interest Expense Income Before Taxes $5,400.00 $602.50 $295.00 $1,982.50 Income Taxes Net Income $495.63 $1,486.88 Retained Earnings, Beg $2,145.00 Add: Net Income $1,486.88 Less: Dividends $446.06 Retained Earnings, End $3,185.81 BALANCE SHEET 2021-12-31 ASSETS Cash $165.81 Accounts Receivable $3,380.00 Inventory $4,460.00 Total Current Assets $8,005.81 Fixed Assets At costs $12,050.00 Cumulated depreciation $3,560.00 Fixed assets (net) $8,490.00 Total Assets $16,495.81 LIABILITIES + EQUITY Accounts Payable $4,080.00 Other current liabilities $675.00 Total Current Liabilities $4,755.00

Answer rating: 100% (QA)

The weighted average cost of capital is calculated by following formul... View the full answer