### The asset beta for firms in the same industry code

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Find the WACC for a firm with the following characteristics. A few years ago the firm issued \$4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of \$3,500,000. The firm has 1,000,000 common shares outstanding at a value of \$6/share. You look up the asset beta for firms in the same industry (SIC) code and determine that value is 1.15. The firm plans on keeping its D/E ratio constant (at the current level) going forward and the tax rate is expected to be 35%. The beta of the firm's debt is estimated as 0.10, the risk free rate is 3% and the market return is 9.8%.

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