What wacc must use to estimate capital budgeting projects


Roxie Epoxy's balance sheet shows a total of $50 million long-term debt with a coupon rate of 8.00% and a yield to maturity of 7.00%. This debt currently has a market value of $55 million. The balance sheet also shows that that the company has 20 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $8.50 per share; stockholders' required return, rs, is 15.00%; and the firm's tax rate is 35%. Based on market value weights, and assuming the firm is currently at its target capital structure, what WACC should Roxie use to evaluate capital budgeting projects?

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Finance Basics: What wacc must use to estimate capital budgeting projects
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