The industry average beta is 0.82, the risk free rate is 26, and the market risk premium is 79%. The yield on the company's debt is 5%, and the firm has a 356 marginal tax rate. The ratio of debt to total asset (debt plus equity) is 32. Thus, the WACC is:

The industry average beta is 0.82, the risk free rate is 26, and the market risk premium is 79%. The yield on the company's debt is 5%, and the firm has a 356 marginal tax rate. The ratio of debt to total asset (debt plus equity) is 32. Thus, the WACC is:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The industry average beta is 0.82, the risk free rate is 256, and the market risk premium is 7%. The yield on
the company's debt is 5%, and the firm has a 356 marginal tax rate. The ratio of debt to total asset (debt
plus equity) is 32. Thus, the WACC is:

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