Author Question: Use the data provided on Cadbury to answer the question below. The risk free rate is 4.25%. The ... (Read 44 times)

moongchi · **on:** Apr 25, 2021

Use the data provided on Cadbury to answer the question below. The risk free rate is 4.25%. The expected return on the market portfolio is 9.75%. The corporate tax rate is 40%. The face value of Cadbury's outstanding bonds is 2.450 billion pounds sterling. The coupon rate on Cadbury's bonds is 4.5%. Assume that the bonds pay annual coupons. The yield to maturity on Cadbury's bonds is 4.5%. Cadbury's bonds mature in 7 years. Cadbury has 1.650 billion common shares outstanding. The market price of Cadbury's common shares as of Dec 31, 2008 is 6.25 pounds sterling. Cadbury's Beta is 0.8. Cadbury's cost of debt (after-tax) is 2.7%. Cadbury's cost of equity is 8.65%. What is Cadbury's WACC?
◦ 6.37%
◦ 7.51%
◦ 7.76%
◦ 8.02%
◦ 8.16%

frejo · **Reply #1 on:** Apr 25, 2021

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