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Please answer in Excel with detailed formulas and proper labels for a great rating! Thank you! ABC Incorporated shares are currently trading for $32 per
Please answer in Excel with detailed formulas and proper labels for a great rating! Thank you!
ABC Incorporated shares are currently trading for $32 per share. The firm has 1.13 billion shares outstanding. In addition, the market value of the firm's outstanding debt is $2 billion. The 10-year Treasury bond rate is 6.25%. ABC has an outstanding credit record and has earned a AAA rating from the major credit-rating agencies. The current interest rate on AAA corporate bonds is 6.45%. The historical risk premium over the risk-free rate of return is 5.5%. The firm's beta is estimated to be 1.1, and its marginal tax rate, including federal, state, and local taxes, is 40%. a. What is the cost of equity? Answer: 12.3% b. What is the after-tax cost of debt? Answer: 3.9% c. What is the WACC? Answer: 11.9%Step by Step Solution
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