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3. WACC Calculation Durr Enterprises has asked

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3. WACC Calculation                                   
Mount Enterprises has asked you to calculate their weighted average cost of capital (WACC).                                    
They have given you the following information:                                   
Mount Enterprise currently has a bond issue outstanding that you are to use to determine their cost of debt financing:                                   
     The bond has 10 years remaining to maturity.                              
     The bond pays interest annually and has a coupon rate of 6%.                               
     The bond is currently quoted at 95% of par.                               
     Total book value of the debt issue is $10 million.                              
     ME's tax rate is 39%.                              
Total shareholders' equity on ME's balance sheet is $3 million.                                   
They issued 500,000 common shares with a par value of $0.10 per share.                                    
Their current stock price is $57 per share.                                   
The beta on ME's stock is 1.2.                                    
The current risk-free rate is 4%.                                    
You have been instructed to use a market risk premium of 7% in your analysis.                                   
Given this information, calculate ME's WACC.

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