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a. The following balance sheet and information are given for Pavone Company (VC):
Current Assets
$2,000,000
Current Liabilities
$1,000,000
Short-term Securities
0
Long-term Liabilities(Bonds)
$5,000,000
Long-term Assets
7,000.000
Equity
$3,000,000
Total
$9,000,000
Additional information: The VC's bond has a face value of $1,000 and pays 10 percent semiannual coupon. The bond matures in 12 years and sells for $920 in the bond market. The beta of VC is 1.25, the market risk premium is 7.95 percent, and the risk-free rate is 2.50 percent. The VC's tax rate is 40%.
What is Pavone's WACC?
b. The following information is given for Guida Company (GC):
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