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also on #2 the missing corporate tax rate is 40% The common stock of...

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Finance

imagealso on #2 the missing corporate tax rate is 40%
The common stock of SA Boot company (SABT) here in San Antonio has a Beta of 0.90. The current risk free rate of return (T- Bill rate) is 3% and the market risk premium is at 20% (this is the rate AFTER you deduct the risk-free from the expected market (S&P 500) rate of return). SAPS's capital structure is: 50% debt, paying 5% to bond holders, and 50% equity (stock). What is SAPS's cost of EQUITY capital? What is the Weighted Average Cost of Capital (WACC) for SAPS given that they are in a 35% corporate tax bracket? Should they accept a project if they have to sink $975,000 into the project and if the project will generate a yearly cash flow if $250,000 for 5 years? What is the most SAPS would be willing to pay to start the project? What's the so-call "breakeven" discount rate for this project? 2. The common stock of Clear Channel Communications (CCU) in San Antonio has a beta Of 1.2. The current T- Bill is priced to yield at 4% and the market risk premium is estimated to be at 10% (or 10% above the expected return in the market). CCU's capital structure is 40% debt paying 7%, 60% equity. What is CCU's equity cost of capital? What is CCU'S WACC

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