I simply need help getting the appropriate WACC for use with the parameters below. Need some guidance
Question:
I simply need help getting the appropriate WACC for use with the parameters below. Need some guidance on how to set this all up to get to an answer (don't need a solution). Need to know how to do it...
Exhibit 1 - Market Value Target Leverage Ratios
Debt as a percentage of Value Average Cost of Debt
United Health Products 30% 7%
New You, Inc 30% 10%
Innovative Health 40% 12%
Better Living, Inc. 25% 8%
Exhibit 2 - Company Data
Average Return Beta Current Market Leverage Ratio Revenues (in $Billions) Effective tax rate
United Health Products 15% 0.88 50% 12 .36
New You, Inc 13% 1.2 20% 1.5 .30
Innovative Health 17% 1.07 60% 1.4 .30
Better Living, Inc. 14% 1.5 15% 0.5 .30
Exhibit 3 - Government Bond Rates & Market Spread Data
US Government Bond Rates
1-year 7.00%
10-year 8.05%
30-year 8.95
Spread Between S&P 500 Composite Returns & Government Bond Returns
Short Term (3-year average) 16%
Long Term (12-year average) 12.50%