FIA Co. is trying to estimate its current cost of capital. FIA Co. believes that the...

 

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FIA Co. is trying to estimate its current cost of capital. FIA Co. believes that the appropriate weight of debt is 40% and the appropriate weight of equity is (1-40%). It has a tax rate of 3%. Its bonds currently trade in the market for a price of $8,785. These $10,000 par value bonds have a coupon rate of 7.8% (semi-annual coupon payments) and they mature in 30 years. The beta of FIA Co. is 1.52. The risk-free rate is 6% and the market return is 13%. The WACC of FIA Co. is _______%. FIA Co. is trying to estimate its current cost of capital. FIA Co. believes that the appropriate weight of debt is 40% and the appropriate weight of equity is (1-40%). It has a tax rate of 3%. Its bonds currently trade in the market for a price of $8,785. These $10,000 par value bonds have a coupon rate of 7.8% (semi-annual coupon payments) and they mature in 30 years. The beta of FIA Co. is 1.52. The risk-free rate is 6% and the market return is 13%. The WACC of FIA Co. is _______%.

Answer rating: 100% (QA)

Calculation of the WACC of FIA Co To calculate the WACC of FIA Co we need to determine the cost of d... View the full answer