Your firm's current capital structure is 40% debt and 60% equity.

Your firm's debt consists of bonds that mature in 5 years, make semiannual coupon payment, and have the bond rating of "A".

To assess your firm's cost of debt, you have collected data on 5-year A-rated corporate bonds in the same industry, which is shown below.

You can assume that the annual YTM on he bonds of the same rating is a close proxy for Pioneer's cost of debt. For simplicity, use the APR convention when

annualizing the cost of debt.(Hint : Current Yield = Annual coupon payment / Price of bond.)

Data from the Corporate Bond Market

Bond Type	Bond rating	Par Value	Time to Maturity	Coupon	Current Yield	Price
Corporate	A	1,000usd	5 Years	Semiannual	11.8%	1,016.9usd

As for the cost of equity, the firm's beta and the mean historical return on the S&P 500 can be calculated using the supplemental Excel file.

Assume your firm's price data is under the current capital structure, which has not changed during the past 5 years. In the excel spreadsheet, :Open" refers to the opening

price at the start of the month. "Adj Close" refers to the closing price at the end of the month adjusted for stock splits and dividends paid. assume that the applicable Treasury bill rate

(annualized) is 1%.

(Hint : Fist calculate the monthly returns of the S&P500 index and your firm.

Stock's beta can be calculated using the =slope function in Excel. For the mean return on the S&P 500 index, you can first find the mean monthly return of the market,

and then find the EAR of the average monthly return.)

The tax rate is 34%

Calculate the WACC under the target capital structure of 50% debt and 50% equity.