Question
Comfort Hotels is attempting to calculate its required rate of return. Comfort has $375M of common equity financing. Its beta estimate is 1.6. The risk-free
Comfort Hotels is attempting to calculate its required rate of return. Comfort has $375M of common equity financing. Its beta estimate is 1.6. The risk-free interest rate is 4.2% and the market risk return is 9.3%. Comfort is also financed with $75M of preferred equity. The preferred equity sells for $35/share and recently paid its annual dividend of $2.80. Comfort also has $200M of public bonds. These bonds have a $1,000 face value, five years to maturity, a 4% coupon rate, and trade in the market for $942.67. Comforts marginal tax rate is 35%. What is Comforts WACC?
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