Estimate your firm's Weighted Average Cost of Capital. Assume that the current risk-free rate of interest is 3.5%, the market risk premium is 5%, and the corporate tax rate is 21%.
Total book value: $10 million
Total market value: $12 million
Coupon rate: 6%
Yield to Maturity: 5%
Total book value: $15 million
Total market value: $20 million
Beta = 1.1
Total book value: $2 million
Total market value: $2.5 million
Price per share: $20
Dividend per share: $1.50
What is WACC
Total Market Value of the firm = $12 + $20 + $2.5
After-tax cost of debt = 5% x (1-21%)
The solution is presented in word and excel format and shows a step by step calculation of the WACC.