Compute the wacc for margo

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Reference no: EM13494644

Margo is a major producer of lawn care products. Its stock currently sales for $80 per share; there are 10.5 million shares outstanding. Margo also has 400,000 bonds outstanding ($1000 face value per bond). These 10-year bonds pay annually have a current yield of 10% and trade at 90% of the face value. The risk free rate is 8%. The market risk premium is 9%, and Margo has beta equal to 2. The corporate tax rate is 34%.

A. Margo is considering expansion of its facilities. Use the SML to determine the cost of equity.

B. Compute the WACC for Margo.

Reference no: EM13494644

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