FIND THE WACC Example: Common Stock: 1 Million shares outstanding, $40 per share, Cost of Equity is 15.68% Debt: 10,000 bonds outstanding, $1,000 FV,8% annual coupons, 22 years to maturity, market price is 1,100 per bond, after-tax cost of debt is 4.68% Taxes: Tax rate is 34% Ans: MV of Equity = 1.2 M* $50 = 60,000,000 MV of Debt = 15,000* 1,200 = 18,000,000 Total=78,000,000 WACC (60,000,000 / 78,000,000)*(.15) + (18,000,000 / 78,000,000) * (.045) = 12.57% = **if after-tax cost of debt is given, IGNORE taxes