Solving problem using capm approach

Reference no: EM131962726

Question: Corporation Y has a face debt value of $40 Million USDs trading at 92% with a pre-tax weighted cost of 8%. Corporation Y common equity for the year was valued at $55 Million of USDs and preferred equity for $15 Million of USDs. The Preferred equity rate was calculated to be 40%. However, the common equity was to be calculated using CAPM approach, with a 4% risk free rate and a 10% market risk premium rate, assuming a 1.2 Beta. If the tax rate is 40%, What is this firm s WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

Reference no: EM131962726

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