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What is Trojan WACC

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Reference no: EM132040178

Question - Trojan Services' CFO is interested in estimating the company's WACC and has collected the following information:

The company has bonds outstanding that mature in 26 years with an annual coupon of 7.5%. The bonds have a face value of $1,000 and sell in the market today for $920.

The risk free rate is 6%.

The market risk premium is 5%.

The stock's beta is 1.2.

The company's tax rate is 40%.

The company's target capital structure consists of 70% and 30% debt.

The company uses the CAPM to estimate the cost of equity and does not include flotation costs as part of its cost of capital. What is Trojan's WACC?

A. 10.87%

B. 9.39%

C. 9.89%

D. 9.75%

Reference no: EM132040178

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