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Exhibit 1 0 . 1 Assume that you have been hired as a consultant by CGT , a major producer of chemicals and plastics, including
Exhibit Assume that you have been hired as a consultant by CGT a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.
Assets
Current assets $
Net plant, property, and equipment $
Total assets $
Liabilities and Equity
Accounts payable $
Accruals $
Current liabilities $
Longterm debt bonds, $ par value $
Total liabilities $
Common stock shares $
Retained earnings $
Total shareholders' equity $
Total liabilities and shareholders' equity $
The stock is currently selling for $ per share, and its noncallable $ par value, year, bonds with semiannual payments are selling for $ The beta is the yield on a month Treasury bill is and the yield on a year Treasury bond is The required return on the stock market is but the market has had an average annual return of during the past years. The firm's tax rate is
Refer to Exhibit What is the best estimate of the firm's WACC? Do not round your intermediate calculations.
a
b
c
d
e
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