Pre-Tax Cost of Debt and Cost of Equity

Related BrainMass Solutions

• APV, Unlevered cost of capital, Debt=equity ratio

  233679 APV, Unlevered cost of capital, Debt=equity ratio A firm has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. The debt-equity ratio is .60 and the tax rate is .34. What is the firm's unlevered cost of capital?

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

  =10% Cost of Equity=Rf+beta of stock*(Rm-Rf)=6%+1.15*10%=17.5% Pre-tax Cost of Debt = Rf+Beta of debt*(Rm-Rf)=6%+0.3*10%=9% Cost of Debt = Pre tax cost of debt*(1-tax rate)=9%*(1-35%)= 5.85% Weight of Debt = 1-Weight of equity = 1-0.8=0.2

• WACC

  WACC = Proportion of debt X after tax cost of debt + Proportion of equity X cost of equity Proportion of debt = 30% After tax cost of debt = Pre tax cost X (1-tax rate) = 9% X (1-0.3) = 6.3% Proportion of equity = 70% Cost of equity = 24.6% WACC

• Weighted average cost of capital

  157883 WACC - The Bigelow Company has a cost of equity of 12 percent, a pre-tax cost of debt of 7 percent, and a tax rate of 35 percent.

• WACC: Weighted Average Cost of Capital

  Pre tax cost of debt =After tax cost of debt/(1- tax rate) =0.03922/(1-0.34) = 0.0469 = 4.69% b) If instead you know the after-tax cost of debt is 5.7 percent, the cost of equity is  _____ percent.

• National Enterprises

  WACC = WdKd(1 - T) + WpKp + WcKs where Wd is the weight of debt Kd is the cost of debt T is the tax rate Wp is the weight of preferred stock Ks is the cost of preferred stock Wc is the weight of common stock Ks is the

• Calculating a Firm's Target Debt-Equity Ratio

  195394 Calculate the Debt-Equity Ratio for Firm Y Firm Y has a cost of equity of 16.5 percent and a pre-tax cost of debt of 7.4 percent. The firm's target weighted average cost of capital is 11.5 percent and its tax rate is 34 percent.

• Calculating unlevered cost of capital

  376778 Unlevered cost of capital The Green Paddle has a cost of equity of 13.73 percent and a pre-tax cost of debt of 7.6 percent. the debt-equity ratio is 0.65 and the tax rate is 32 percent. What is green paddle's unlevered cost of capital?

• Weighted Average Cost of Capital

  233105 Compute Weighted Average Cost of Capital (WACC) for Firm X If Firm X has a 28% cost of equity and a 10% before tax cost of debt capital. The firm's debt to equity ratio is 2. Firm X is interested in investing in a telecom project.