QUESTION 18

Anker Inc. is a listed company in New York. Its current before interest after-tax operating cash flow is $200 million. The cash flow is expected to grow at 8% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available:

Tax rate 30% Risk-free rate 5% Market return 15% Equity beta 2 Cost of debt 10% D/E 60%

Given the above data, the after-tax weighted average cost of capital (WACC) of Anker Inc. is around:

19.38%

18.25%

14.34%

Not enough information to calculate