Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Estimate your firm’s Weighted Average Cost of Capital. Assume that the current risk-free rate of interest is 3.5%, the market risk premium is 5%, and the corporate tax rate is 21%.
Ø Debt:
• Total book value: $10 million
• Total market value: $12 million
• Coupon rate: 6%
• Yield to Maturity: 5%
Ø Common Stock:
• Total book value: $15 million
• Total market value: $20 million
• Beta = 1.1
Ø
• Total book value: $2 million
• Total market value: $2.5 million
• Price per share: $20
• Dividend per share: $1.50
What is your firm’s Weighted Average Cost of Capital (input as a raw number, i.e. if your answer is 7.1%, input 7.1)?
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