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What is Acort equity cost of capital

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Question - Acort Industries has 11 million shares outstanding and a current share price of $36 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 7%, and has a $96 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 4.2%. Acort has EBIT of $103 million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $20 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 35%, 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).

Required -

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

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

Reference no: EM133044141

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