Calculate the weighted average cost of capital for xia-ping

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Xia-ping Corporation is a multination enterprise with main markets in east Asia. The firm has seen improvement in its financials despite the setbacks over the last half of its fiscal year. The firm is a mid-sized entity with 21,500,000 shares outstanding. The firm's shares are very liquid, trading at high volumes each day, with a last trading price of $19.50.

Extracts of the firm's balance sheet shows:

Long-term debt $315,225,000

Equity capital (book value $15 ea.) $322,500,000

The market reported treasury rates at 6.25%, and the firm is able to borrow at 9.50%. The firm's beta is 1.05 and there is a risk premium of 4.95%. The effective corporate tax rate of the firm is 25%.

Problem 1: Calculate the Weighted Average Cost of Capital (WACC) for Xia-ping Corp.

Reference no: EM133009784

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