Company A has a D/E ratio of 3:2 pays taxes at the rate of 40%. There is no preferred equity. Its bond which has a face value of $1,000 will mature in the next 20 years with annual coupons of (7%) and currently sells for 95% of its face. The required rate of return on the market portfolio is 15.2%. The prevailing T-Bill rate is 9% and the stock beta value is 2. 1. What is the company's WACC? 2. What is meant by Company A's capital structure? 3. If Company A were to modify its capital structure such that its D/E = 2, what would be company A's percentage change in its WACC? |