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3. Compute WACC for company ABC : Market value of its debt is 400mm; market value of its equity is 300mm; stock is currently priced

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3. Compute WACC for company ABC : Market value of its debt is 400mm; market value of its equity is 300mm; stock is currently priced at $20 per share and pays an annual dividend of $0.75 in next year. The annual dividend payment is expected to growth at 1%. Bond rating is A and maturity is 10 years. 10-year Treasuries yield 2%. The average yield spread between 10 -year Treasury and 10 -year A-rated corporate bonds is around 121 basis points or 1.21%. The firm's tax rate is 40%. (5 points)

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