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Atlas Corp is a privately-held firm with an estimated market value-based D/E = 0.22 and a...

Atlas Corp is a privately-held firm with an estimated market value-based D/E = 0.22 and a 6.5% cost of debt capital. The firm’s tax rate is 35%. You have identified a comparable firm that has an equity beta of 2.15, a D/E ratio of 0.80, an expected 7.0% cost of debt, and a 30% marginal corporate tax rate. If the risk-free rate is 4% and the market risk premium is 4.2%, what is your estimate of Atlas’s weighted average cost of capital (WACC)?

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Answer #1

first (6 of all lets Calculate auct bete I tim using Comparable firm date = Equity bete + D (1-tax) -2.15 = 1.3782 Equity bet

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