West Glenn Industries Ltd. has provided you with the following information and a

Question

West Glenn Industries Ltd. has provided you with the following information and asked that you calculate their weighted average cost of capital (WACC). Assume a tax rate of 40%. $4 million bond issue outstanding with 10 years until maturity. The bonds have a coupon rate of 4.5% and pay interest semi-annually. The bonds are currently yielding 3.0% on the open market. 2,500,000 common shares are issued and outstanding, with an average issue price of $4.50 per share. The shares are currently trading at $6.10 per share. West Glenn has a ß = 1.20. The risk-free rate is 1.50%, while the market risk premium is 3.75%. Retained Earnings currently has a credit balance of $1,050,000.
What is the WACC for West Glenn Industries Ltd.? (Note:use four (4) decimal places for all calculations)
a. .0365
b. .0497
c. .0504
d. .0509

Explanation / Answer

Option - c is correct !! Cheers !!

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