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Pricing model to estimate the cost of equity capital

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Reference no: EM131958996

Calculate the cost of capital for operations (WACC) for ACME, Inc. Use the capital asset pricing model to estimate the cost of equity capital.

U.S. Government long-term bond rate                             2.80%

Market risk premium                                                        5.00%

Equity beta                                                                        1.04

Per-share market price                                                $65.00

Shares outstanding                                                        20.0 million

Net financial obligations on balance sheet                 $700.0 million

Weighted-average borrowing cost                                   7.6%

Statutory tax rate                                                            21.0%

Reference no: EM131958996

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