11)

1. 11).
   The total book value of WTC's equity is $10 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 15%. The firm's bonds have a face value of $5 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm's tax rate is 40%. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC: 12.42%

2. 8).
   Here is some information about Stokenchurch Inc.:
   
   Beta of common stock = 1.2
   Treasury bill rate = 4%
   Market risk premium = 7.5%
   Yield to maturity on long-term debt = 6%
   Book value of equity = $440 million
   Market value of equity = $880 million
   Long-term debt outstanding = $880 million
   Corporate tax rate = 35%
   
   What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC: 8.45%

3. 9).
   Reactive Industries has the following capital structure. Its corporate tax rate is 40%.
   
   Security Market Value Required Rate
   of Return
   Debt $20 million 4%
   Preferred stock 10 million 6
   Common stock 50 million 10
   
   What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC: 7.60%

4. 10).
   The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI's capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 40%.
   
   a. What is BCCI's cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
   
   
   b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
   
   
   c. If BCCI is presented with a project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm?

a. Cost of equity capital: 11.2%
b. WACC: 8.74%
c. Yes

5. 11).
   The total book value of WTC's equity is $8 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 13%. The firm's bonds have a face value of $5 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 10%, and the firm's tax rate is 40%. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC: 10.80%

6. 10).
   The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI's capital structure is 22% debt, paying an interest rate of 5%, and 78% equity. The debt sells at par. Buildwell pays tax at 40%.
   
   a. What is BCCI's cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
   
   
   b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
   
   
   c. If BCCI is presented with a project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm?

a. Cost of equity capital: 11.2%
b. WACC: 9.40%
c. Yes

7. 8).
   Here is some information about Stokenchurch Inc.:
   Beta of common stock = 1.7
   Treasury bill rate = 4%
   Market risk premium = 7.0%
   Yield to maturity on long-term debt = 7%
   Book value of equity = $390 million
   Market value of equity = $780 million
   Long-term debt outstanding = $780 million
   Corporate tax rate = 35%
   
   What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC: 10.23%