Question
Geronimo Corp is financed 60% with equity and 40% with debt. Currently, its debt has a before-tax yield to maturity of 5%. Geronimo's common stock
Geronimo Corp is financed 60% with equity and 40% with debt. Currently, its debt has a before-tax yield to maturity of 5%. Geronimo's common stock has a beta of 1.75 and market risk premium is 8% while risk free rate is 1%. If the tax rate is 40%, what is Geronimo's weighted average cost of capital (WACC)?
- A. 7.40%
- B. 7.83%
- C. 10.20%
- D. 9.00%
- E. 11.47%
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
