Estimate bing after-tax wacc

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Bing Industries has 10 million shares outstanding and a current share price of $35 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 8%, and has a $80 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 6%. Bing has EBIT of $90 million, which is expected to remain constant each year. Depreciation expense is about $11 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 30% and Bing is expected to keep its debt-equity ratio constant in the future.

(i). Estimate Bing's after-tax WACC

(ii). Estimate Bing's cost of equity

Reference no: EM132406716

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