Calculate Volant’s Weighted Average Cost of Capital and round to 1 basis point.

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
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25 - For 2023, Volant Inc. is forecast to have Free Cash Flow to the Firm of $1.7 million and Free Cash Flow to Common Equity of $1.3 million. You forecast Free Cash Flow to the Firm to grow at a constant rate of 3.50% while Free Cash Flow to Common Equity grows at 4.00%. Volant’s tax rate is forecast to be 25%.  You also collect the data shown below.

 

                                    Book Value       Market Value

Debt                       $14.5 million    $15.0 million    YTM:    4.24%

      Common Equity      $21.0 million    $45.0 million    Rate of Return: 7.00%

 

      Calculate Volant’s Weighted Average Cost of Capital and round to 1 basis point.

 

            WACC: 

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