In your analysis, you have already compiled relevant market metrics. For example, the current return on

US Treasury bills is set at $2\%,$ and the historical market return stands at $8\%.$ You also found important

values for Mockingjay Enterprises, which will be useful in your calculations: the company's beta $()$ is

$1\mathrm{.}2,$ indicating a higher volatility in returns than the market average, and the corporate tax rate

applicable to Mockingjay Enterprises is $21\%,$ the flat rate applied to businesses.

A more in$-$depth analysis of the firm's finances has provided additional information. Mockingjay

Enterprises currently has $3\mathrm{.}5$ million shares of stock outstanding at a price of $$571\mathrm{.}43$ per share, while

the market value of its debt is $$650$ million. This total debt value is comprised of three separate bond

issues, each with distinct characteristics, but all providing quarterly coupon payments. Bond $A$ is valued

at $$200$ million, carries a $5\%$ coupon rate, and has $10$ years until maturity, with a current quoted price of

$$101\mathrm{.}50.$ Bond $B,$ with a $$250$ million value, offers a $6\%$ coupon rate and matures in $15$ years, with a

quoted price of $$97\mathrm{.}70.$ Finally, Bond $C$ is valued at $$200$ million, with a $4\mathrm{.}5\%$ coupon rate, a shorter

maturity of $5$ years, and a quoted price of $$99\mathrm{.}23.$ Assume that the YTM for each bond approximates its

current market rate.

Case Questions

Calculate the cost of equity using the Capital Asset Pricing Model $($CAPM$).$

What is the afterntax cost of debt for Mockinglay Enterprises?

Calculate the weighted average cost of capital $($WACC$)$ for the firm.