H20 f A B C D E F G H L M N 0 Q R S T U V 1 Calculating WACC - with taxes. 2 An all equity company in the food business wishes to estimate its cost of capital. The company is not publically traded and therefore wishes to evaluate the beta of other companies to estimate its own beta. 3 The risk free rate is 2% and the market risk premium is 7%. The corporate tax rate is 25% 4 6 5 Here is information about other companies in the food business (you can assume that the debt of these firms is roughly risk free with a cost of debt of 2%) DN Beta of equity 7 Company A 0.5 1.2 8 Company B 0.6 1.3 9 Company C 0.3 1 10 11 12 What should be the cost of capital of your company? (Hint - calculate the WACC of each company and then unlever it. Use the average unlevered return as your cost of capital) 13