Problem: Currently, Bloom Flowers Inc. has a capital structure consisting of 20 percent debt and 80 percent equity. Bloom's debt currently has 8 percent yield to maturity. The risk free rate is 5 percent and the market risk premium is 6 percent. Using CAPM, Bloom estimates that its cost of equity is currently 12.5 percent. The company has a 49 percent tax rate.
Q1. What is Bloom's current WACC?
Q2. What is the current beta on Bloom's common stock
Q3. What would Bloom's beta be if the company had no debt in its capital structure