Adjusted WACC. Thorpe and Company is currently an? all-equity firm. It has three million shares selling for $40 per share. Its beta is 1.2, and the current? risk-free rate is 4.1?%. The expected return on the market for the coming year is 11.6%. Thorpe will sell corporate bonds for $40,000,000 and retire common stock with the proceeds. The bonds are? twenty-year semiannual bonds with a 8.5% coupon rate and ?$1,000 par value. The bonds are currently selling for $1,102.75 per bond. When the bonds are? sold, the beta of the company will increase to 1.5. What was the WACC of Thorpe and Company before the bond? sale? What is the adjusted WACC of Thorpe and Company after the bond sale if the corporate tax rate is 30%?? Hint?: The weight of equity before selling the bond is? 100%.
The WACC before the bond sale is 13.10%
What is the adjusted WACC of Thorpe and Company after the bond sale if the corporate tax rate is 30%?