The capital structure of wild west inc is as, Ask an Expert

Accounting

The capital structure of Wild West Inc. is as follows:
- Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and present price at par

- Preferred shares: $2,000,000 (face value) paying 5% dividends which is trading at 95 percent

- Common shares: Current stock price at $5 per share with 1,000,000 shares issued and outstanding. The risk-free rate is 5%, the market risk premium is 6%, and the beta of Wild West Inc. is 1.15

- Marginal tax rate is 40%

Requirements: Show your calculation

a. Determine the WACC for Wild West Inc.

b. Should Wild West Inc. accept an IRR of 7% new project which is of same risk as all the existing projects of the Big Plan? Why and why not?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9531340

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