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What is the WACC for Mercury industries

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Reference no: EM132936399

Question - Kurt, an accountant at Mercury Industries, is reviewing his company's financials. He has gathered the following information:

The company's Assets total $20 million.

The company has debt of $12 million. This debt is in the form of corporate bonds that yield 5% for bond holders.

Shareholders in this company expect a return of 8%, and the company intends to live up to this expectation.

The corporate tax rate is 30%.

 Government bonds currently yield 3% to their holders. They are considered risk-free.

The expected return on the market is 7%.

All yields are quoted as effective annual rates.

Using this information, What is the implied beta for Mercury Industries under the CAPM?

What is the WACC for Mercury industries?

A year has passed, and Kurt is still working at Mercury Industries. The beta for the company is now 1.3, but the expected market return and the yield on government bonds remains unchanged. According to CAPM, what returns do shareholders now expect?

Reference no: EM132936399

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