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1) (TCO E) Daves Inc. recently hired you as the consultant to evaluate company's WACC. You have got the given information. (1) The firm's non-callable bonds mature in 20 years, have 8.00% annual coupon, par value of= $1,000, and market price of= $1,050.00. (2) Company's tax rate is= 40%. (3) Risk-free rate is= 4.50%, market risk premium is= 5.50%, and stock's beta is= 1.20. (4) Target capital structure consists of= 35% debt and balance is common equity. Firm uses CAPM to evaluate cost of common stock, and it doesn’t expect to issue any new shares. Compute its WACC?

a) 7.16%
b) 7.54%
c) 7.93%
d) 8.35%
e) 8.79%

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Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915076

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