Question
Carbon Fiber Design and Build Inc. is considering the purchase of new a new carbon molding machine for use in their Sports Operations department. The
Carbon Fiber Design and Build Inc. is considering the purchase of new a new carbon molding machine for use in their Sports Operations department. The investment would be an expansion of an industry segment that the firm knows well. You have been tasked with helping the division manager determine the WACC in advance of an analysis of the expected cash flows for the project. You have collected the following information: The firm has no preferred stock outstanding and has no plans to issue preferred stock. The estimated tax rate for the firm is 30%. The firm currently has $518,175 of bonds outstanding with at a pre-tax cost of 6.5%. The firm also has 31,888 shares of common stock outstanding at a price of $32.50 per share. The current yield to maturity on 10-year Treasury bonds is 3%, and the firm's beta is 0.95. Given this information, calculate the following figures. After-tax cost of debt: ______ Cost of equity: ______ Equity amount (in dollars): ______ WACC: ____
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