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Problem 19-3 WACC Consider the following information for Federated Junkyards of America. Debt: $76,000,000 book value outstanding. The debt is trading at 91% of book

Problem 19-3 WACC

Consider the following information for Federated Junkyards of America.

  • Debt: $76,000,000 book value outstanding. The debt is trading at 91% of book value. The yield to maturity is 10%.
  • Equity: 2,600,000 shares selling at $43 per share. Assume the expected rate of return on Federateds stock is 19%.
  • Taxes: Federateds marginal tax rate is Tc = 0.21.

Calculate the weighted-average cost of capital (WACC).

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