Question
Company A is 30% financed by debt. It issues bonds with a 7% coupon, fifteen year maturity, $1,000 par value, and a market price of
Company A is 30% financed by debt. It issues bonds with a 7% coupon, fifteen year maturity, $1,000 par value, and a market price of $1,170.
Equity beta is 1.2, the market risk premium is equal to 8.4% and the risk-free rate is 3.8%.
Estimate WACC of company A based on the given information. Assume a 35% tax rate and annual compounding.
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Handbook Of The Economics Of Finance Volume 2A
Authors: George M. Constantinides, Milton Harris, Rene M. Stulz
1st Edition
