18.9%
Finding a company's cost of capital is crucial in corporate finance for a few key reasons. For illustration, a corporation might calculate its net present value using the WACC discount rate. A lower WACC typically denotes a healthy company that can draw investors at a reduced cost. The industry has three firms with un levered betas of 0.7, 1.1, and 1.6. the discount rate to use for a un levered firm that wants to enter this industry is 18.9% if the risk-free rate is 3 percent and the expected return on the market is 17 percent
The WACC discount formula is: WACC = E/V x Ce + D/V x Cd x (1-T)
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