MacG, Inc. has an equity market capitalization of $7,400,000. Its equity beta is 4.2. The risk-free rate and market return are expected to be 1.4% and 7.2%, respectively. MacG also has 2,700,000 in bonds that have a yield-to-maturity of 5.4%. If MacG faces a tax rate of 14%, which is the weighted average cost of capital for MacG?

Answer rating: 100% (QA)

First calculate the cost of equity using the capital asset pricing model CAPM Cost of equity Riskfre... View the full answer