XYZ manufactures parts for the auto industry. The company currently has 20 million shares outstanding trading at $25 per share.
The company has two hundred $1000 par value bonds outstanding with a coupon rate of 6.25% paid semiannually.
The bonds are currently trading at 101 and mature in 12 years.
XYZ has a beta of .85
The 10-year Treasury yield is 4 percent
The expected return on the market is 10 percent
XYZ's tax rate is 21 percent
a. Calculate XYZ's cost of debt
b. Calculate XYZ's cost of equity
c. Calculate XYZ's WACC