Using the Course Reader, Texas Voices: Documents and Biographical Sketches, choose one chapter for each Course Reader Assignment (CRA)
January 4, 2018
Use precise economic terminology to explain whether this discount most likely reflects a “fantastic deal” or something else
January 4, 2018

What is Jack’s weighted average cost of capital?

Jack’s Construction Co. has 100,000 bonds outstanding that are selling at par value. The bonds yield 10.3 percent. The company also has 4.8 million shares of common stock outstanding. The stock has a beta of 1.5 and sells for $60 a share. The U.S. Treasury bill is yielding 4 percent and the market risk premium is 7 percent. Jack’s tax rate is 35 percent. What is Jack’s weighted average cost of capital?

12.77 percent
10.76 percent
6.25 percent
12.49 percent
9.04 percent

 

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