Comprehensive WACC example Table 19.2 Market Information Current Risk Free rate on US Treasury Notes Historical Market Premium for stocks(vs Risk Free) 4.0% 5.5% Company Information: Market Value of Equity (S millions) Beta of Company Stock(Measure of Volatility) Market Value of Debt ($ millions) Interest Rate (Yield to maturity") YTM 90.0 10.0 6 096 40% Tax Rate Yield to maturity is used in WACC computation, not coupon rate Adapted from FP&A and PM, Alexander, 2018 Required: 1. Compute the Cost of Equity 2. Compute the Cost of Debt 3. Compute the Weighted Average Cost of Capital(WACC)