Question
Currently, Forever Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Forever's debt currently has an 7% yield to maturity. The
Currently, Forever Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Forever's debt currently has an 7% yield to maturity. The risk-free rate (rRF) is 3%, and the market risk premium (rM - rRF) is 5%. Using the CAPM, Forever estimates that its cost of equity is currently 13.5%. The company has a 40% tax rate.
What is Forever's current WACC? Round your answer to two decimal places. %
What is the current beta on Forever's common stock? Round your answer to two decimal places.
What would Forever's beta be if the company had no debt in its capital structure? (That is, what is Forever's unlevered beta, bU?) Do not round intermediate calculations. Round your answer to two decimal places.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started