Homework answers / question archive / 1) Suppose that LilyMac Photography expects EBIT to be approximately $70,000 per year for the foreseeable future, and that it has 300 10-year, 4 percent annual coupon bonds outstanding

1) Suppose that LilyMac Photography expects EBIT to be approximately $70,000 per year for the foreseeable future, and that it has 300 10-year, 4 percent annual coupon bonds outstanding

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1) Suppose that LilyMac Photography expects EBIT to be approximately $70,000 per year for the foreseeable future, and that it has 300 10-year, 4 percent annual coupon bonds outstanding. What would the appropriate tax rate be for use in the calculation of the debt component of LilyMac's WACC?

2) A firm has 4,000,000 shares of common stock outstanding. Market price is $9/share. A beta of 2.0. It has 55,000 bonds outstanding, each selling for $990 with a $1,000 face

value. The bonds mature in 20 years, have a coupon rate of 8 percent, and pay coupons

semi-annually. and the expected market risk premium is 8%, risk free rate is 4% . The tax rate is 35 percent. What is WACC?