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    WACC, Beta of Levered & Unlevered, Enterprise Value

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    Duck Company has the following capital structure. Its corporate tax rate is 35%.
    Security
    Book Value
    Market Value
    Cost
    Debt
    $18 million
    $20 million
    6%
    Common stock
    $27 million
    50 million
    14%
    Compute WACC ________________%
    CAMPCO has only one bond issue outstanding. The bonds carry an annual coupon of 8%, mature in 19 years, and currently trade at 105. Berber's tax rate is 35%.
    What is the after-tax cost of debt? __________________%
    Atlas Corp has 30% debt and 70% equity. Its cost of debt is 6% and the cost of equity 11%. The tax rate is 40%.
    What is the WACC? _______________%
    Morton Salt free cash flow is expected at $38 million next year. The free cash flow is expected to grow at 4% forever. Using the WACC computed in #3, compute the total enterprise value of the firm.
    Given the 30% debt / 70% equity capital structure, what is Morton's market value of the equity? $_________
    Incipio Inc. has $30 million debt, $20 million preferred stock and $50 million common stock. The costs of debt, preferred and common are 7.5%, 10% and 12%, respectively. Incipio's tax rate is 35%.
    What is its WACC? _______________%
    Medtronic capital structure is 50% debt and 50% equity. The company is planning to build a plant to manufacture a new semi-automatic gearbox called SLICK. BASF produces only SLICK gearboxes. BASF's beta is 1.2 and BASF's capital structure is 30% debt and 70% equity. The risk free-rate is 3%, the market premium is 7%, and Medtronic's after-tax cost of debt is 6%.
    What discount hurdle rate should Medtronic apply to the new plant? Use the proxy firm beta method.
    Medtronic's capital structure is 50% debt and 50% equity. The company is planning to build a plant to manufacture a new semi-automatic gearbox called SLICK. BASF produces only SLICK gearboxes. BASF'sbeta is 1.2 and BASF's capital structure is 30% debt and 70% equity. The risk free-rate is 3%, the market premium is 7%, and Medtronic's after-tax cost of debt is 6%.
    What discount hurdle rate should Medtronic apply to the new plant? Use the proxy firm beta method.

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    https://brainmass.com/business/finance/wacc-beta-levered-unlevered-enterprise-value-628260

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    Solution Summary

    The solution provide various example how WACC, Beta of Levered firm, beta of Unlevered firm, Enterprise Value, cost of equity using CAPM are computed.

    $2.19