Question
DeVry Construction, Inc has 2,000 common shares, 1,000 bonds outstanding, and no preferred stock. Its securities have been performing very well in the marketplace. It
DeVry Construction, Inc has 2,000 common shares, 1,000 bonds outstanding, and no preferred stock. Its securities have been performing very well in the marketplace. It has a common stock price of $35 per share, up from $20 a year ago. Its bonds have also not performed well, currently priced at $750 per bond, down from $850 a year ago. Its stock is expected to have a beta coefficient of 3.5 and a market risk premium of 6.5%. The yield on 20-year Treasury Bonds is 5.5%. DeVry Construction's bonds are rather typical for the industry having 30-year maturities, 10% coupon rates, and $1000 face values. DeVry, Construction is in the 27 % marginal tax rate. What is the W ACC of DeVry Construction, Inc?
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