A firm’s CFO wants to estimate the firm’s WACC, and has comp…
A firm’s CFO wants to estimate the firm’s WACC, and has compiled the following information below. The firm uses CAPM to estimate the cost of equity, and does not account for any kind of floatation costs in the calculation of the cost of capital. What is the firm’s WACC? Capital structure 60% equity Bonds outstanding yield 8.75% Real-risk free rate 5% Market risk premium 6% Beta 1.4 Tax rate 40%