Question: Example - WACC - 1 Equity Information 50 million shares $80 per share Beta = 1.15 Market risk premium = 9% Risk-free rate =

Example - WACC - 1 Equity Information 50 million shares $80 per

Example - WACC - 1 Equity Information 50 million shares $80 per share Beta = 1.15 Market risk premium = 9% Risk-free rate = 5% What is the cost of equity? RE=5+1.15(9) = 15.35% Debt Information $1 billion in outstanding debt (face value) Current quote = 110% Coupon rate = 9%, semiannual coupons 15 years to maturity Tax rate = 40% What is the cost of debt? N = 30; PV=-1100; PMT = 45; FV = 1000; CPT I/Y = ? RD 3.927(2) 7.854% What is the after-tax cost of debt? RD(1-T)=7.854(1-4) = 4.712%

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