Solved: What is the cost of capital-what is the cost of equity, Finance Basics

+44 141 628 6080
[email protected]

What is the cost of capital-what is the cost of equity

Problem:

A firm has an equity beta of 1.16 and a debt to equity ratio of 3/1, with an expected market portfolio of 10%. The interest rate on government bonds is 5% and the firm can borrow long term at a rate of 6% and the corporate tax rate is 40%. What is the cost of capital? What is the cost of equity?

Solution Preview :

Prepared by a verified Expert

Finance Basics: What is the cost of capital-what is the cost of equity

Reference No:- TGS02037812

Now Priced at $20 (50% Discount)

Recommended (90%)

Rated (4.3/5)

Have a Question? (oR Write a Review)

Write atleast 100 words!!

Recent Questions Asked Finance Basics

Q : Discuss importance of applying operations management

Include examples from real world companies where possible and should enhance the importance of applying operations management

Q : Position to estimate the beta for a company

Now we are in a position to estimate the beta for a company and compute Ki, the required rate of return.

Q : List the remedies available for non-breaching parties

List the remedies available for non-breaching parties. Briefly describe these remedies. List and describe the defenses to breach of contract actions.

Q : Calculate the annual rate of return for quayle oil company

The oil well will cost $490,000 and will have a $10,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return.

Q : What is the cost of capital-what is the cost of equity

The firm can borrow long term at a rate of 6% and the corporate tax rate is 40%. What is the cost of capital?

Q : What are examples of assertiveness techniques

List three to five examples of assertiveness techniques that you believe might be useful to a supervisor.

Q : Prepare an analysis showing eagles line elimination

If the Eagle line is eliminated, $34,000 of fixed costs will remain. Prepare an analysis showing whether the Eagle line should be eliminated.

Q : Benefits and costs of using sites like alibaba

List in separate columns,the benefits and costs of using sites like Alibaba's to trade internationally

Q : Financial leverage and operating leverage based problem

What is the usual relationship between financial (debt) leverage and operating leverage? Why is this so?

1950913

Questions
Asked

3,689

Active Tutors

1416124

Questions
Answered

Start Excelling in your courses, Ask a tutor for help and get answers for your problems !!

ask Question

Asked Questions

Discuss patient with athsma about use of bronchodilators

You're instructing a patient with athsma about the use of bronchodilators. You should teach the patient which one?

Discuss new forms of advertising changing opdps work

How have social media and other new forms of advertising changing OPDP's work?

Observing and reporting a correctional clients behavior

Observing and reporting a correctional client's behavior is extremely important, to ensure they receive the right mental health care.

Discussion about improve patient satisfaction scores

You are trying to improve patient satisfaction scores in your hospital's emergency department. You decide to poll 40 patients a day for three weeks.

Problem concerning about the risk for stroke

Sam is concerned about his risk for his stroke since his dad died of stroke at age 57 based on the following information why would you recommend

Patient presented with acute-onset abdominal pain

You are on your 5th straight duty in the Urgent Care and you are seeing a 18 yo may who presented with acute-onset abdominal pain for 2 days.

Discuss - male with a history of moderate persistent asthma

A nurse is caring for an 8-year-old male with a history of moderate persistent asthma. He is accompanied by his mom and dad who reported