(Answered) Develop the weighted average cost of capital wacc for a

Management Studies

Develop the Weighted Average Cost of Capital (WACC) for a business.

Given the following inputs and assumptions, estimate the WACC for Gallo Distributors, Inc.:

Risk-free rate: 1%
Equity risk premium: 5%
Beta: .85
Size Premium: 6%
Company Specific Risk Premium: 1%
Pre-tax borrowing rate: 5.5%
Fair Market Value of Debt to Fair Market Value of Invested Capital: 20%

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