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QUESTION

Blue Thumb's stock has a beta of 1. The current t-bill yield (risk-free rate,Rf) is 5.5% and the expected return on the market portfolio (Rm) is 11....

Blue Thumb’s stock has a beta of 1.2. The current t-bill yield (risk-free rate,Rf) is 5.5% and the expected return on the market portfolio (Rm) is 11.5%. The company’s preferred stock pays an $8.50 per share dividend each year and the price of it is $88 per share. The yield to maturity of Blue Thumb’s bonds is currently 9.7%. If Blue Thumb is in the 30% tax bracket, what is the company’s WACC?

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