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Author Question: Malitz Inc. recently hired you as a consultant to estimate the companys WACC. You have obtained the ... (Read 12 times)

redpassion

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on: Aug 7, 2023
Malitz Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information.

– Malitz’s noncallable bonds mature in 26 years, have a 9% annual coupon, a par value of $1,000, and a market price of $1,120.

– The company’s tax rate is 35%.

– The risk-free rate is 5%, the market risk premium is 6%, and the stock’s beta is 1.3.

– The target capital structure consists of 40% debt and the balance as common equity. Malitz uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock. What is its WACC?


◦

9.73%


◦

9.95%


◦

10.32%


◦

10.76%

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by redpassion on Aug 7, 2023

FireandIce

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Reply #1 on: Aug 7, 2023
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redpassion

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Reply 2 on: Aug 7, 2023
YES! Correct, THANKS for helping me on my review

recede

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Reply 3 on: Yesterday
Wow, this really help

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