Question 15()

1. A firm has $600 market value of equity and $300 market value of debt. The firm also has $100 in nonconsolidated subsidiaries and $50 in excess cash. If the firms expected EBITA is $100, what is the value-to-EBITA ratio?

2. A firm has 1,200,000 shares of stock outstanding with a price per share equal to $14. There are 10,000 bonds outstanding, priced at $1,125 each. The cost of equity is 14 percent, the cost of debt is 8 percent, and the corporate tax rate is 40 percent. What is the WACC?