Business, 15.02.2021 20:30 888914

A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.04% and a value of $3,500,000. The firm has 1,000,000 common shares outstanding at a value of $6/share. You look up the asset beta for firms in the same industry (SIC) code and determine that value is 1.15. The firm plans on keeping it's D/E ratio constant (at the current level) going forward and the tax rate is expected to be 35%. The beta of the firms debt is estimated as 0.30, the risk free rate is 3% and the market return is 9.8%. Required:
Find the WACC for above firm.

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A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is tra...

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