< > You are tasked with estimating the weighted average cost of capital for Lockheed Martin (ticker=LMT). LMT has a levered beta of 0.61. LMTs debt to equity ratio is 0.08. LMTs pre-tax cost of debt is 4%. Assume a risk free rate of 3%, a market risk premium of 5%, and a corporate tax rate of 35%.

Estimate LMTs WACC (15 points)

Suppose the corporate tax rate falls to 20%.Estimate the impact on the WACC. (10 points)