You are estimating the weighted average cost of capital (WACC) for your company based on the following
Question:
You are estimating the weighted average cost of capital (WACC) for your company based on the following information:
Equity information 50 million common shares outstanding $80 market price per share Stock beta of 1.15, Market risk premium of 9% Risk-free rate of 5%
Debt information $1 billion of debt at face value Debt quoted price = 110 Coupon rate = 9%, semi-annual 15 years to maturity Marginal tax rate of 40%
Calculate the following returns: (1/100 of one percent without % sign, e.g. 12.671, if a negative percentage, -9.56).
1. Cost of equity (%):
2. Cost of debt (%):
3. Proportion of debt (%):
4. Proportion of equity (%):
5. Weighted average cost of capital (%):
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook