Cost of Equity, Debt, Weight of Debt & Weighted Cost of Capital
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How would you calculate the cost of equity, cost of debt, weight of debt and weight of debt and weighted cost of capital with the following given information.
debt-to-equity ratio = .25
beta of common = 1.15
beta of debt = .3
market risk of premium = 10%
risk-free rate = 6%
corporate tax rate = 35%
weight of equity = 80%
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Solution Summary
Calculations fully shown to find these 4 measures when given numerous capital budgeting data.
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Rf=Risk free rate = 6%
Beta of common stock =1.15
Market risk premium = (Rm-Rf)=10%
Cost of Equity=Rf+beta of ...
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