Problem Solving WACC

Equity Information

1. 50 million shares
2. $80 per share
3. Beta = 1.11
4. Market risk premium = 7%
5. Risk-free rate = 2%

Debt Information

1. $1 billion in outstanding debt (face value)
2. Current quote = 108
3. Coupon rate = 9%, semiannual coupons
4. 15 years to maturity
5. Tax rate =35%

• What is the cost of equity? [K]

• What is the before-tax cost of debt? [L]

• What is the WACC?[M]