What is the companys weighted average cost of capital, Financial Management

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What is the companys weighted average cost of capital

Burlees Inc.’s CFO has collected the following information to calculate its WACC:

The company’s capital structure consists of 60% debt and 40% common stock.

The company has 20-year, 12% annual coupon bonds that have a face value of $1,000 and sell for $1,200.

The company uses the CAPM to calculate the cost of common stock. Currently, the risk-free rate is 3% and the market risk premium is 5%. The company’s common stock has a beta of 2.

The company’s tax rate is 40%.

What is the company’s weighted average cost of capital (WACC)?

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