Example 1: Calculating overall WACC under actual capital structure example: Assume firm calculates cost of equity with CAPM and cost of equity with government bond yield plus Debt Rate Premium above Government. Spread between S&P 500 Composite Returns and Long-Term U.S. Government Bond Returns is 7%. U.S. Government Interest Rates on 30-year bond is 4%. UNR inc.'s Debt Rate Premium above Government is 3%. UNR's equity beta is 1.2. Tax rate is 40%. Target capital structure has 40% and 60% equity. 2015 Data from UNR inc.' Balance Sheet Capitalization and Returns Total assets Long-term debt Shareholders' equity $9,500.0 7,000.00 2000.0 Per Share and Other Data Market price (year-end) Shares outstanding (millions) 50.00 560.00 a) Using the given information calculate WACC of the UNR inc. under actual capital structure. b) Using the given information calculate WACC of the UNR inc. under target capital structure. c) Change target capital structure to 30% debt and 70% equity. Calculate WACC under this target capital structure