Explore BrainMass

Cost of Equity, Debt, Weight of Debt & Weighted Cost of Capital

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%

Solution Preview

Rf=Risk free rate = 6%
Beta of common stock =1.15
Market risk premium = (Rm-Rf)=10%

Cost of Equity=Rf+beta of ...

Solution Summary

Calculations fully shown to find these 4 measures when given numerous capital budgeting data.