1. Daves Inc. recently hired you as a consultant to estimate the companys WACC. You have obtained the following information. (1) The firm's noncallable bonds have a yield to maturity of 6%. (2) The companys tax rate is 30%. (3) The risk-free rate is 1.50%, the market risk premium is 5.50%, and the stocks beta is 1.6. (4) The target capital structure consists of $40 million debt and $60 million common equity. The firm uses the CAPM to estimate the cost of equity. What is its WACC?

WACC = w_dr_d(1 T) + w_cr_s

CAPM: r_i = r_RF + b_i (r_M r_RF)