A. Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's cost of equity capital, using the capital asset pricing model: B. Using the information from the table, determine the weight on debt capital that should be used to calculate
A. Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's cost of equity capital, using the capital asset pricing model: B. Using the information from the table, determine the weight on debt capital that should be used to calculate
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
The following data pertains to Xena Corp.
Xena Corp. |
|
Total Assets |
$21,249 |
Interest-Bearing Debt (market value) |
$11,070 |
Average borrowing rate for debt |
10.2% |
Common Equity: |
|
Book Value |
$5,535 |
Market Value |
$23,247 |
Marginal Income Tax Rate |
19% |
Market Beta |
1.64 |
|
|
A. Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's
B. Using the information from the table, determine the weight on debt capital that should be used to calculate Xena's weighted-average cost of capital.
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