Eagle Construction Co. is a successful privately-held firm owned by Marquette alumni. - It has $200 million bonds outstanding due in ten years with a 7% coupon paid semi-annually. They are valued at 110% of par value. - The company also has 25 million shares of common stock outstanding among the partners. The stock book value is $2/ share and is valued at $11/ share. - A survey of publicly-held firms in their industry estimates a beta of 1.1. - The risk-free rate is 3% and the market equity return is 12%. - Analysts suggest an additional 3% premium due to their small size. - Eagle's tax rate is 20%. Step One: - Calculate the (pre-tax) yield-to-maturity of the bonds - Calculate the (after-tax) yield-to-maturity of the bonds Step Two: - Calculate the equity cost Step Three: - Calculate the debt and equity mix (\%) Debt Equity Step Four: - Calculate the WACC