Calculate the WACC for a firm with the following data:

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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4) Calculate the WACC for a firm with the following data:
Comparable Firms
Firm A
Firm B
Firm C
Risk Free Rate
Expected Mkt Return
Market Standard Deviation
Industry Standard
Deviation
Most Recent Debt Rating
Default Premium
Firm's Debt/Equity Ratios
Actual
Target
Firm's Marginal Tax Rate
i)
10.075%
Correlation
Coefficients
Market
0.67
0.89
0.77
3.80%
10.30%
17.00%
21.00%
6.50%
0.72
1.63
30%
Industry
0.54
0.72
0.66
ii) 14.112%
Past Returns
Std Deviation
iii)
38%
29%
42%
8.672%
Tax
D/E
Rate
0.67
30%
0.29
40%
1.34 30%
iv) 11.724%
Transcribed Image Text:4) Calculate the WACC for a firm with the following data: Comparable Firms Firm A Firm B Firm C Risk Free Rate Expected Mkt Return Market Standard Deviation Industry Standard Deviation Most Recent Debt Rating Default Premium Firm's Debt/Equity Ratios Actual Target Firm's Marginal Tax Rate i) 10.075% Correlation Coefficients Market 0.67 0.89 0.77 3.80% 10.30% 17.00% 21.00% 6.50% 0.72 1.63 30% Industry 0.54 0.72 0.66 ii) 14.112% Past Returns Std Deviation iii) 38% 29% 42% 8.672% Tax D/E Rate 0.67 30% 0.29 40% 1.34 30% iv) 11.724%
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