Use the following information:

Debt: $68,000,000 book value outstanding. The debt is trading at 89% of book value. The yield to maturity is 11%.

Equity: 1,800,000 shares selling at $35 per share. Assume the expected rate of return on Federateds stock is 20%.

Taxes: Federateds marginal tax rate is T_c = 0.21.

Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to 16.75% (D/V = 0.1675). The pre-tax cost of debt has dropped to 10.6%. The companys business risk, opportunity cost of capital, and tax rate have not changed.

Use the three-step procedure to calculate Federateds WACC under these new assumptions.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

The answer is not 11.48% or 15.15%

Use the following information: - Debt: $68,000,000 book value outstanding. The debt is trading at 89% of book value. The yield to maturity is 11%. - Equity: 1,800,000 shares selling at $35 per share. Assume the expected rate of return on Federated's stock is 20%. - Taxes: Federated's marginal tax rate is Tc=0.21. Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to 16.75% ( DN= 0.1675). The pre-tax cost of debt has dropped to 10.6%. The company's business risk, opportunity cost of capital, and tax rate have not changed. Use the three-step procedure to calculate Federated's WACC under these new assumptions. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places