Solved: Determine the company cost of equity capital, Finance Basics

Determine the company cost of equity capital

Question:

David Ortiz Motors has a target capital structure of 40 percent debt and 60 percent equity. The yield to maturity on the company's outstanding bond is 9 percent, and the company tax rate is 40 percent. Ortiz's CFO has calculated the company's WACC as 9.96 percent. What is the company's cost of equity capital?

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Finance Basics: Determine the company cost of equity capital

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