Charlie's Computer Correction Connection (C4) runs a chain of computer repair franchises and has been growing rapidly. C4's stock sells for $41 per share and has 220,000 shares outstanding. C4 is a relatively risky stock with a beta of 2.1. C4 also has 4000 bonds outstanding, maturing in 8 years with a face value of $1,000 each. The bonds have an 8% annual coupon rate (make annual coupon payments) and currently sell for $1,080. Treasury bills (risk-free rate) offer a 3% return, the return on the S&P 500 (market return) is expected to be 13% and the tax rate is 30%. What are C4's cost of equity and after-tax cost of debt? What is C4's WAAC?

Answer rating: 100% (QA)

Cost of Equity CAPM Calculate the expected market return on C4 Beta 21 Market return Rm 13 Riskfree ... View the full answer