WACC

6. Vandelay Industries Incorporated (VII) is a publicly traded company with 25 min shares outstanding which are currently trading at a price of $12.25 per share. The correlation between the returns on the company's stock and those of the S&P/TSX Composite Index is 0.65 and the volatility of VII's stock returns is 40%. VII also has 120,000 coupon bonds outstanding. The bonds have a 3.5% coupon rate (paid annually), 16 years to maturity, and a default spread of 375 basis points. Assume VII's marginal tax rate is 32%. a. What are the weights of debt and equity in VII's capital structure? [4 points) b. What is VII's cost of equity? (4 points) I c. What is VII's weighted average cost of equity? 12 points) 6. Vandelay Industries Incorporated (VII) is a publicly traded company with 25 mln shares outstanding which are currently trading at a price of $12.25 per share. The correlation between the returns on the company's stock and those of the S&P/TSX Composite Index is 0.65 and the volatility of VII's stock returns is 40%. VII also has 120,000 coupon bonds outstanding. The bonds have a 3.5% coupon rate (paid annually), 16 years to maturity, and a default spread of 375 basis points. Assume VII's marginal tax rate is 32%. a. What are the weights of debt and equity in VII's capital structure? [4 points) b. What is VII's cost of equity? [4 points) c. What is VII's weighted average cost of equity? (2 points) 6. Vandelay Industries Incorporated (VII) is a publicly traded company with 25 min shares outstanding which are currently trading at a price of $12.25 per share. The correlation between the returns on the company's stock and those of the S&P/TSX Composite Index is 0.65 and the volatility of VII's stock returns is 40%. VII also has 120,000 coupon bonds outstanding. The bonds have a 3.5% coupon rate (paid annually), 16 years to maturity, and a default spread of 375 basis points. Assume VII's marginal tax rate is 32%. a. What are the weights of debt and equity in VII's capital structure? [4 points) b. What is VII's cost of equity? (4 points) I c. What is VII's weighted average cost of equity? 12 points) 6. Vandelay Industries Incorporated (VII) is a publicly traded company with 25 mln shares outstanding which are currently trading at a price of $12.25 per share. The correlation between the returns on the company's stock and those of the S&P/TSX Composite Index is 0.65 and the volatility of VII's stock returns is 40%. VII also has 120,000 coupon bonds outstanding. The bonds have a 3.5% coupon rate (paid annually), 16 years to maturity, and a default spread of 375 basis points. Assume VII's marginal tax rate is 32%. a. What are the weights of debt and equity in VII's capital structure? [4 points) b. What is VII's cost of equity? [4 points) c. What is VII's weighted average cost of equity? (2 points)