27. Table 19.6 is a simplified book balance sheet for Apache Corp. at year-end 2008. Here is some further information:

Number of outstanding shares (N ) 335.75 million Price per share (P) $74.0 Beta 1.21 Treasury bill rate .11%

20-year Treasury bond rate 2.25%

Cost of debt (rD) 7.50 Marginal tax rate 35%

a. Calculate Apache’s WACC. Use the capital asset pricing model and the additional information given above. Make additional assumptions and approximations as necessary.

b. What is Apache’s opportunity cost of capital?

c. Finally, go to the Standard & Poor’s Market Insight Web site ( www.mhhe.com/

edumarketinsight ) and update your answers to questions

(a) and (b).

Current assets 4,451 Current liabilities 2,615 Net property, plant, and equipment 23,959 Long-term debt 4,816 Investments and other assets 7,776 Other liabilities 5,246 Shareholders’ equity 16,509 Total 29,186 Total 29,186