Clark communications has a capital structure that consists, Ask an Expert

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Clark Communications has a capital structure that consists of 70% common stock and 30% long-term debt. In order to calculate Clark's WACC, an analyst has accumulated the following information:

The company currently has a 30-year bond issue outstanding, 15-years old, 8% annual coupon bonds that have a face value of $1,000 and sell for $1,075.

The risk-free rate is 5%.

The market risk premium is 4%.

The beta on Clark's common stock is 1.1.

The company's retained earnings are sufficient so that they do not have to issue any new common stock to fund capital projects.

The company's tax rate is 38%.

Given this information, what is Clark's WACC? (Hints: find bond's YTM; use CAPM for stock return)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91381182

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