12-1. Calculating Cost of Equity

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• Calculating WACC

  Calculating WACC Weston Industries has a debt-equity ratio of 1.5. Its WACC is 12 percent, and its cost debt is 9% percent. The corporate tax rate is 35 percent. a) What is Westonâ??s cost of equity capital? b) What is Westonâ??

• Finding asset beta and WACC for a all-equity firm

  Where Ke=expected return Krf= risk free return=4% Km-Krf = market risk premium=10% Therefore Ke=4%+0.8*(10%)=12% Cost of equity = Ke=12% Since firm is all equity financed, WACC=cost of equity=12% Solution describes the steps for calculating

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• Calculating WACC for a Corporation

  119671 Calculating WACC A Corp. has no debt but can borrow at 8 %. The firm's WACC is currently 12% and has tax rate of 35%. a. What is the cost of equity? b. If the Corp. converts to 25 % debt,what will cost of equity be? 50 %? c.

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  Ke=4%+0.8*(10%)=12% Cost of equity = Ke=12% Since firm is all equity financed, WACC=cost of equity=12% Solution describes the steps for calculating asset beta and weighted average cost of capital for a all-equity financed firm.

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