Unformatted text preview: A. 15.30% B. 14.90% C. 15.10% D. 15.70% E. 15.50% 13. Your company’s CFO is interested in estimating the company's weighted average cots of capital (WACC) and has collected the following information: • The company has bonds outstanding that mature in 18 years with an annual coupon of 7.5 percent (the bond pays $75 on an annual basis). The bonds have a face value of $1,000 and sell in the market today for $1,120, giving a before-tax cost of debt of 6.36145%. • The risk-free rate is 3 percent • The market risk premium is 5 percent • The stock's beta is 1.2 • The company's tax rate is 40 percent • The company's target capital structure consists of 60 percent equity and 40 percent debt • The company uses the CAPM to estimate the cost of equity and does not include flotation costs as part of its cost of capital – it uses the cost of retained earnings....
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- Spring '08
- Cost Of Capital, Weighted average cost of capital, weighted average cost, new common stock