Angel Inc. recently hired you as a consultant to estimate the companyâ€™s WACC. You have obtained...

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Finance

Angel Inc. recently hired you as a consultant to estimate thecompanyâ€™s WACC. You have obtained the following information. (1)The firm's noncallable bonds mature in 20 years, have an 8.00%annual coupon, a par value of $1,000, and a market price of$1,225.00. (2) The companyâ€™s tax rate is 40%. (3) The risk-freerate is 4.50%, the market risk premium is 5.50%, and the stockâ€™sbeta is 1.20. (4) The target capital structure consists of 35% debtand the balance is common equity. The firm uses the CAPM toestimate the cost of equity, and it does not expect to issue anynew common stock. What is its WACC? Do not round your intermediatecalculations.
8.48%
10.01%
7.80%
6.79%
7.63%

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3.7 Ratings (464 Votes)

The cost of debt is calculated by computing the yield to maturity Information provided Par value future value 1000 Time 20 years Current price present value 1225 Coupon rate 8 Coupon payment 0081000 80 Enter the below in a financial calculator See Answer

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