Cowbell Corp. is a manufacturer of musical instruments. There are 45 million shares, each selling at $80 / share with an equity beta of 1.48. The risk-free rate is 5% and the market risk premium is 9%. There is $1.07 billion in outstanding debt (face value), paying a 9% s/a coupon for 15 years, which is currently quoted at 110% of par. Assuming a 40% tax rate, what is Cowbell Corp.’s WACC?

Answer rating: 100% (QA)

First calculate the cost of equity using the CAPM formula Cost of equity Riskfree rate Equity beta M... View the full answer