WACC: Capital Asset Pricing Model Pre Tax Cost of debt A company has $5.5 billion in total debt and its cost of debt (pre-tax) is 4.1%. Tax rate The corporate tax rate is 21%. The company has 50 million shares outstanding and its stock price is $163 per share. The company's stock has a Beta of 1.2. Total debt ($ millions) 1. What is the company's weighted average cost of capital (WACC)? Debt as % of Total Capital #DIV/O! 2. If the company's stock price rises to $200 per share and the company After Tax cost of debt 0.0% reduces long-term debt by $500 million, what is the new WACC? Risk Free Rate (10 Yr. Treasury) 2.4% Beta Your answers here: Equity Risk Premium 6.6% Cost of Equity (using CAPM) 2.4% Equity as % of Total Capital #DIV/O! Shares Outstanding (millions) Share Price Market Equity Value ($ millions) 50 WACC calculated Weight Cost Debt #DIV/O! 0.0% Equity #DIV/O! 2.4% WACC #DIV/0