Question
Stealth Services' CFO has gathered the following data in order to determine the company's WACC: * The corporation has outstanding bonds with a 26-year maturity
Stealth Services' CFO has gathered the following data in order to determine the company's WACC: * The corporation has outstanding bonds with a 26-year maturity date and a 7.5 percent yearly yield. The bonds currently trade for $920, despite having a $1,000 face value. * The companys target capital structure consists of 70 percent equity and 30 percent debt * The risk-free rate is 6 percent. * The market risk premium is 5 percent. * The stocks beta is 1.2. * The companys tax rate is 40 percent. * The corporation estimates the cost of equity using the CAPM and excludes the cost of flotation from its cost of capital. Required: What is Stealths WACC?
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