Estimate Harrison Holding WACC

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Harrison Holding’s Inc. capital structure consists of 20% in Bond I with YTM of 10%, 15% in Bond II with YTM of 13% and rest is common stock equity financing. 1-year risk free rate is 3%, expected return on S&P 500 index is 8% and estimated equity beta for HHI is 2.1. Company’s tax rate is 40%. A) Estimate Harrison Holding’s Inc. WACC. B) Re-estimate WACC if HH Inc. opportunistically increases usage of Bond I to 30% and Bond II to 20% (Assume costs of bonds won’t change.)

Reference no: EM131863123

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