Bristol Manufacturing has hired you to estimate its cost of capital for new investment decisions....
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Bristol Manufacturing has hired you to estimate its cost of capital for new investment decisions. The firm has 4 million shares of common stock outstanding that are trading for $7.85 per share. The companys beta according to Yahoo Finance is 1.20. The rate on 10-year t-bonds (risk free rate) is currently 1.7%. The market risk premium is 6.75%. Bristol has an average tax rate of 22.5% and a marginal tax rate of 26%. Bristols bonds have a 5.25% coupon rate, a $1,000 face value, pay semi-annual coupons, and mature in 11 years. There are 5,000 of these bonds outstanding and they are currently selling in the open market for $927.83. What is the Bristols Weighted Average Cost of Capital (WACC)?
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