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# Calculations for the WACC of a Company

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1. You need to estimate the equity beta for Golden Clothiers, Inc. Golden's debt-to-equity ratio is 85%, which is higher than a typical firm in its industry. The following table shows the levered equity betas and debt-to-equity ratios for three comparable chemical firms.

Assume the tax rate is 40%.

(See attached file for data)

a. Assuming debt is risk-free, use the information given above to estimate the unlevered equity betas of each of these companies.
b. What is your estimate of Golden Clothiers' levered equity beta?
c. If T-Bills are yielding 1.8% and the return on the market is 9.3%, what is the required return on Golden Clothiers' stock, according to the CAPM?
d. Golden has 5-year maturity bonds outstanding with a par value of \$1,000 that pay annual coupons of 5%. These bonds are currently selling for \$982. What is Golden's required return on debt?
e. If Golden has no preferred stock outstanding, their debt-to-equity ratio of 85% is expected to remain constant going forward, and their marginal tax rate is 40%, what is their weighted average cost of capital?