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Suppose that Free People is considering an investment in its online portal. The investment will be...

Suppose that Free People is considering an investment in its online portal. The investment will be evaluated using the firm’s WACC. The firm’s cost of debt is 4.0%, tax rate is 35%, and beta is .91. The risk-free rate is 2.5% and the market risk premium is 5%. The firm’s shares currently sell for $8/share and there are 455 million shares outstanding. The firm has $2.2 billion in debt that currently sells at par value and $2.0 billion in book value of equity. The firm does not pay dividends. What is the best estimate of the firm’s WACC based on this information.

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