orastapti Questions 20 mars Styles What a disaster your friend Kalum Smith is. He did not know how to even begin to answer the previous question that his boss had anked him to do. Kalum's unethical behavior during his time in school has now caught up to him. That is why it is important for students to always conduct themselves in an honest and ethical manner, and not look to take short cuts. Students must always try their best and avoid the temptation of cheating on exams. Kalum's boss wants to give him one more chance to prove himself, so he gives Kalum the following question to answer. Kalum has been asked to calculate the weighted average cost of capital (WACC) for an important client (TLC Inc.) of the company. TLC has a debt to equity ratio of fifty percent, and a tax rate of forty percent. TLC has twenty- year bonds that have been issued seven years ago. The bonds were originally issued with a nine percent coupon rate and are presently selling for 108% of face value. TLC Inc. has a beta of 90 and many people in the investment community are projecting a market risk premium of only seven percent. The risk-free rate of interest is presently yielding eight percent. TLC Inc. had just issued a dividend of $1.80 per share and guidance has been provided to the markets that the dividend is expected to grow at seven percent for the foreseeable future. After checking the market watch web site, we see that the shares of TLC are trading at twenty-five dollars per share. The boss also asks Kalum to write a paragraph explaining why using WACC is not always appropriate in evaluating projects