What is the firm’s WACC?

2.      Happy Valet, Inc. has a 14.5% cost of unlevered equity and can issue debt at a rate of 8%.  It faces marginal corporate income tax rate of 40% and has debt and equity assets of 30% and 70%, respectively (calculated using market values).


a.      What rate of return do stockholders require on Happy Valet’s levered equity assets?


                                                              i.      10.15% or 16.17%


b.      What is the firm’s WACC?


                                                              i.      11.59% or 12.76%