Pixar productions is evaluating a new project. Their analysts have determined that the IRR of the project is 17.46%. Should Pixar pursue the project? Pixar's shares currently trade for $72.04 per share and they have 4.46M shares outstanding. They have 3 bond issues outstanding one will mature in 4 months and has a yield to maturity of 7.34% the other two are considered long-term debt and will mature in 21 years and 23 years; each has a yield-to-maturity of 23% and 17% respectively. Currently, the 4-month bond trades for a total market value of $9.83M, the 21-year bond has a total market value for the issue of $20.25M, and the 23-year bond has a total market value for the issue of $16.41M. On their financial statements, the total value of equity is $2.63M and the value of their debt is $49M. Pixar has a beta of 0.7, the expected market risk premium is 10.99% and the risk-free rate is 4.6%. Assume that Pixar's tax rate is 26.1%. Enter the WACC as your answer.

Answer rating: 100% (QA)

To calculate the weighted average cost of capital WACC for Pixar we need to determine the cost of eq... View the full answer