1. Watson Dunn is planning to value BCC Corporation, a provider of a variety of industrial metals and minerals. Dunn uses a single-stage FCFF approach. The financial information Dunn has assembled for his valuation is as follows:

25 points

To calculate WACC, he will assume the company is financed 30 percent with debt.

The market value of its debt is $3.2 billion.

The cost of common stock is 7.4%.

The after-tax cost of debt is 4%.

The tax rate is 40 percent.

The FCFF for the most recent year was $1.8 billion.

The FCFF growth rate is 3 percent.

• The company has 1.5 billion shares outstanding.

Using Dunns information, calculate the following:

A. WACC

B. Value of the corporation