Kenny feels that he has only used one way to assess the potential return of his portfolio. He wonders what the Beta he sees on Yahoo Finance would tell him about the stock and how he can apply it to his calculations. He starts reading and finds a method called CAPM. He also finds that the current 10-year treasury yield is 0,8% and that the return of the market portfolio is 4,5%.

CAPM of stock C is 2,65%

All these calculations have made Kenny enthusiastic for using his knowledge acquired during Corporate Finance at IB. He decides to dive a little deeper into the financials of stocks C company.

He finds the following information on the internet: Number of shares issued 3,7 million Current Share Price $ 40,50 Book value of debt $ 50 million Corporate Tax Rate 40% It appears that the companys debt consists of one bond that has been issued very recently and has a price of $ 92 per $ 100 par value. The bond has an annual coupon of 3%.

The bond is callable at par after 2 years. 9. Calculate the companys after tax WACC based on all the information you have acquired about company C so far.

WACC is 2,59%

How did they get to this wacc and what was the cost of debt?