Business, 02.03.2020 20:54 SmokeyRN

Equity Information

50 million shares $80 per share
Beta = 1.15
Market risk premium = 9%
Risk-free rate = 5%
Debt Information $1 billion in outstanding debt (face value)
Current price = 1100
Coupon rate = 9%, semiannual coupons 15 years to maturity
Tax rate = 40%

a. What is the cost of debt?
b. What is the cost of equity (using the CAPM)?
c. What is the AFTER-TAX cost of debt?
d. What are the capital structure weights?
e. Compute the Weighted Average Cost of Capital (the WACC) cost of debt?

Answers: 3

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Equity Information

50 million shares $80 per share
Beta = 1.15
Market ris...

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