FIN/370 – Calculate WACC (weighted average cost of capital) using the CAPM

Calculate WACC (weighted average cost of capital) using the CAPM (capital asset pricing model) to assess whether a company should make an investmentDetermine what discount rate (WACC) the company should use to evaluate the investment- Warehouse facility believes it will generate an internal rate of return of 11.5%The market value of the company’s capital structure is as follows:Source of CapitalMarket ValueBonds$10,000,000Preferred Stock$2,000,000Common Stock$8,000,000What the company used to finance the investment:- Issued 20 year bonds with a $1,000 par value, 6% coupon rate and at a market price of $950- Preferred stock paying a $2.50 annual dividend was sold for $25 per share- Common stock is currently selling for $50 per share and has a beta of 1.2- Tax rate is 34%- Expected market return of the S&P 500 is 13%- 10-Year Treasury note is currently yielding 3.5%