Case studies in Finance (FIN470)

1. The total debt ratio of Kamas Corporation is 0.30 for the optimal capital structure. As outstanding debt, the firm only has long term bonds and the YTM of this bonds is 0.0335. The current corporate tax rate is 0.40. Regarding the components of cost of equity, the firm provides the information below: T-bond returns: 0.0175 Firm's beta: 2.15 Market Return: 0.09 What is the WACC of Kamas Corporation? Show your calculations. (50 MARKS)