Question
Develop the Weighted Average Cost of Capital (WACC) for a business. Given the following inputs and assumptions, estimate the WACC for Gallo Distributors, Inc.: Risk-free
Develop the Weighted Average Cost of Capital (WACC) for a business.
Given the following inputs and assumptions, estimate the WACC for Gallo Distributors, Inc.:
- Risk-free rate: 1%
- Equity risk premium: 5%
- Beta: .85
- Size Premium: 6%
- Company Specific Risk Premium: 1%
- Pre-tax borrowing rate: 5.5%
- Fair Market Value of Debt to Fair Market Value of Invested Capital: 20%
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Fundamentals of Investments, Valuation and Management
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
8th edition
1259720697, 1259720691, 1260109437, 9781260109436, 978-1259720697
