Question: Table 19.6 is a simplified book balance sheet for Apache Corp. at year

Question

Question: Table 19.6 is a simplified book balance sheet for Apache Corp. at year-end 2008. Here is some further information: a. Calculate Apache's WACC. Use the capital asset pricing model and the additional information given above. Make additional assumptions and approximations as necessary. b. What is Apache?s opportunity cost of capital? c. Finally, go to the Standard&Poor;?s Market Insight Web site (www.inhhe.com/ edumarketinsighi) and update your answers to questions (a) and (b). Table 19.6 Simplified book balance sheet for Apache. year-end 2008 (figures in $ millions).

Explanation / Answer

Solution:

a. Using CAPM return on equity-

re =rf + ?(rm

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