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Problem Solving WACC(8%) Equity Information i. 50 million shares ii. $80 per share ii. Beta 1.11 iv. Market risk premium-7% V. Risk-free rate-2% Debt Information

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Problem Solving WACC(8%) Equity Information i. 50 million shares ii. $80 per share ii. Beta 1.11 iv. Market risk premium-7% V. Risk-free rate-2% Debt Information vi. $1 billion in outstanding debt (face value) vii. Current quote 108 viii. Coupon rate 9%, semiannual ix. 15 years to maturity x. Tax rate:-35% coupons a. What is the cost of equity? b. What is the after-tax cost of debt? c. What are the capital structure weights? d. What is the WACC? 4

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