David Ortiz Motors has a target capital structure of a 40% debt and 60% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.96%. What is the company's cost of equity capital?© BrainMass Inc. brainmass.com March 4, 2021, 5:37 pm ad1c9bdddf
First calculate the true cost of the debt financing by applying the tax shield for a firm ...
In a clear and concise response, the solution shows the formulas and calculates the answer to the question about the cost of equity capital.