A balance sheet shows a total of $25 million long term debt with coupon rate of 8%. The yield to

maturity on this debt is 8.5%, and the debt has a total market value of $28 million. The company

has 10 million shares of stock, and the stock as a book value per share of $6. The current stock

price is $20 per share and the stockholders required rate of return rs is 13.50%. The company

recently decided that its target capital structure should have 40% debt, with the balance being

equity. The tax rate is 40%. Calculate WACCs based on book, market and target capital structures.

What is the sum of three WACCs?

Book equity = BV/share * No. Shares Market equity = P0 * No. Shares