hard · Investment Banking valuation-core
A private company's comparable set has an unlevered (asset) beta of 0.90. The company is targeting a capital structure of D/E = 0.6 and faces a marginal tax rate of 25%. The risk-free rate is 4%, the equity market risk premium is 6%, and the pre-tax cost of debt is 6%.
Using the Hamada re-levering formula, what is the company's WACC at its target capital structure?
- 9.6%
- 9.1%
- 7.4%
- 7.6%
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