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Ashman wacc before selling the bonds

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Ashman Motors is currently an all equity firm. It has two million shares outstanding, selling for $43 per share. The company has a beta of 0.80, with the current risk free rate at 3.5% and the market premium at 7.6%. The tax rate is 40% for the company. Ashman has decided to sell $43 million of bonds and retire half its stock. The bonds will have a yield to maturity of 8.1%. The beta of the company will rise to 1.2 with the new debt. The company will be able to buy back the shares at $43 per share. What was Ashman's WACC before selling the bonds? What is its new WACC after selling the bonds and retiring the stock with the proceeds from the sale of the? bonds?

Reference no: EM132507569

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