Estimate? acort wacc

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Acort Industries has 5 million shares outstanding and a current share price of $37 per share. It also has? long-term debt outstanding. This debt is risk? free, is four years away from? maturity, has an annual coupon rate of 9%? and has a $119 million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 5.4%.

Acort has EBIT of $107 ?million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $12 million per? year, while no changes to net working capital are expected in the future. The corporate tax rate is 40%?, and Acort is expected to keep its? debt-equity ratio constant in the future? (by either issuing additional new debt or buying back some debt as time goes? on).

a. Based on this? information, estimate? Acort's WACC.

b. What is? Acort's equity cost of? capital?

Reference no: EM133110161

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