| Course | FNCE 4101 Corporate Finance |
|---|---|
| Week | Week 5 |
| Paper type | WACC brief |
| Length | About 550 words, 4 pages |
| Format | APA 7 student paper |
| School | Walden University |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for FNCE 4101 Week 5
Halvorsen Industrial Supply's Weighted Average Cost of Capital at 8.5 Percent: Five Rows, Two Weights and a Numbered Defense of Every Input
Student Name
Walden University
FNCE 4101: Corporate Finance
Instructor Name
Month Day, Year
Halvorsen Industrial Supply's Weighted Average Cost of Capital at 8.5 Percent: Five Rows, Two Weights and a Numbered Defense of Every Input
The Calculation
Table 1
Weighted Average Cost of Capital for Halvorsen Industrial Supply
| Row | Component | Value | Weight | |
|---|---|---|---|
| 1 | Cost of equity | 9.80% | Equity 75.9% | |
| 2 | Cost of debt before tax | 5.80% | Debt 24.1% | |
| 3 | Tax rate | 24.0% | | |
| 4 | Cost of debt after tax | 4.41% | | |
| 5 | Weighted average cost of capital | 8.50% | | |
WACC = 0.759 x 9.80% + 0.241 x 4.41% = 8.50%. Halvorsen is a composite listed company; inputs are illustrative and should be refreshed from the named sources on the valuation date.
Defense of Each Row
1. Cost of equity, 9.80 percent. Built with the capital asset pricing model: risk-free rate plus beta times the equity risk premium. The risk-free rate is 4.3 percent, the 10-year Treasury yield, chosen because the projects this rate will discount, warehouses and systems, last about ten years; the yield is read from the Treasury's daily par yield curve (U.S. Department of the Treasury, n.d.). Beta is 1.10, the median five-year beta of four comparable listed industrial distributors, measured on monthly returns against the S&P 500. A peer median is used because a single company's beta is noisy. The equity risk premium is 5.0 percent, close to the implied premium Damodaran publishes each January from S&P 500 prices and expected cash flows (Damodaran, n.d.). So 4.3 + 1.10 x 5.0 = 9.8 percent.
2. Cost of debt before tax, 5.80 percent. This is the yield to maturity on Halvorsen's traded 5 percent bonds due in 2033, not their 5 percent coupon, which was set by the rates prevailing at issue; the yield reflects what lenders require now.
3. Tax rate, 24 percent. The effective rate in Halvorsen's tax note, which is the rate at which interest actually saves tax.
4. Cost of debt after tax, 4.41 percent. 5.80 percent x (1 − 0.24). Interest is deductible, so each dollar of interest costs Halvorsen only 76 cents after tax.
5. Weights. Market values, not book values. Equity is 60 million shares at $30.00, or $1,800 million. Debt is the $600 million face of the bonds valued at 95.0 percent of face, or $570 million, from the bonds' traded price. Total capital is $2,370 million: 75.9 percent equity and 24.1 percent debt. Book values would overstate debt's share, because the bonds trade below face.
What the Rate Is For
The 8.5 percent rate is the hurdle an ordinary Halvorsen project has to clear to pay lenders and shareholders what they expect (Brealey et al., 2020). It should be used for projects like the company's existing business, such as a new distribution warehouse. A project with different risk, such as entering a new industry, needs its own rate. Using 8.5 percent for a riskier venture would flatter it, and over time a company that does so drifts toward its riskiest projects.
Sensitivity
The rate is most sensitive to the equity inputs, because equity carries three-quarters of the weight. A beta of 1.0 instead of 1.10 lowers the rate by about 0.4 points; raising the market premium half a point, to 5.5, adds about the same. A half-point change in the bond yield moves the rate by less than 0.1 point.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw Hill.
Damodaran, A. (n.d.). Implied equity risk premiums: United States. NYU Stern School of Business. https://pages.stern.nyu.edu/~adamodar/
U.S. Department of the Treasury. (n.d.). Daily Treasury par yield curve rates. https://home.treasury.gov/resource-center/data-chart-center/interest-rates
The Walden FNCE 4101 Week 5 instructions
In Week 5 you work out a firm's blended cost of capital and justify each input. Present a table listing what shareholders require, what lenders require before and after tax, the tax rate and the blended result, with equity and debt weights shown. Number your defense to match the rows. For the cost of equity, name the risk-free rate's tenor and source, the beta's provider, window and index, and the source of the equity risk premium. For debt, use the yield on the company's traded bonds. Use market-value weights. Explain what the rate should be used for and which inputs it is most sensitive to.
Inside the FNCE 4101 Week 5 example
The brief opens with a five-row table and states the formula. The numbered defense explains the 4.3 percent 10-year Treasury yield from the daily par yield curve, chosen to match ten-year projects; a 1.10 beta as the median of four peers over five years of monthly returns; and a 5.0 percent equity risk premium near Damodaran's implied figure. It takes the 5.8 percent yield on the 2033 bonds, applies the 24 percent effective tax rate and computes weights from a $30.00 share price and bonds at 95.0 percent of face. A section, citing Brealey and colleagues, limits the rate to average-risk projects, and a sensitivity section shows that equity inputs move it most.
Where the marks sit in the FNCE 4101 Week 5 rubric
WACC briefs are graded on accurate calculation and sourced, defensible inputs. Each input should name its source and the choices behind it, such as the Treasury tenor or the beta window, so a reader could reproduce it. The cost of debt should come from a market yield, not a coupon, and weights should use market values. A strong brief explains what the rate is for, average-risk projects, and warns against applying it to riskier ventures. Showing which inputs the result is most sensitive to helps a reader know where to check first. Unsourced figures, book-value weights or a pre-tax cost of debt in the formula lose credit.
FNCE 4101 Week 5 help: mistakes that cost marks
Build the table first, then defend each row in order. For the risk-free rate, pick a Treasury maturity close to the life of the projects and note the date. For beta, say where it came from, over what period and against which index; a median of comparable companies is steadier than one firm's beta. Use a published equity risk premium. For debt, find the yield on the company's bonds or a similar rating. Compute weights from market values. Then change beta and the premium by a little and see what happens. Common errors are book weights and coupon rates. Tell us the company and we can help assemble the inputs. Put a date beside every market input; yields and prices move daily, and an undated figure cannot be checked.
Get a FNCE 4101 Week 5 example written to your instructions
Hand over the Week 5 prompt, the rubric and any figures your instructor fixed in advance, and the brief comes back built on those instead of the ones here. The first sample is free and arrives inside 24-48 hours. Every source behind the table is named in a footnote, so the build can be checked row by row.
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FNCE 4101 Week 5 questions, answered
Where can I find a free FNCE 4101 Week 5 sample paper?
The five-row table and the numbered defense of every input appear below in full, free.
What WACC does the FNCE 4101 Week 5 brief reach?
8.5 percent: shareholders require 9.8 percent, and borrowing costs 4.41 percent after tax.
Why use the bond yield rather than the coupon?
The yield reflects what lenders require today; the coupon reflects rates when the bonds were issued.
Why market-value weights?
Investors hold the company's securities at market prices, and book values would overstate debt's share because the bonds trade below face.
Which inputs move the rate most?
The equity inputs, beta and the equity risk premium, because equity carries about three-quarters of the weight.