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2. Find the cost of equity of Plan B Industries if its capital structure is 25% debt and 75% equity and its cost of debt is 2.33%. Plan B is a private firm and to estimate its cost of equity three publicly traded firms operating in the same industry have been identified, with their data presented in the table. The tax rate is 40%. a. 17.45% b. 19.97% c. 19.13% d. 20.81% e. 18.29% D/V RD RE Ro Firm 1 0.18 4.1% 9.7% Firm 2 0.55 2.3% 29.8% 18.1% Firm 3 0.28 3.7% 20.9% 17.7%

2. Find the cost of equity of Plan B Industries if its capital structure is 25% debt and 75% equity and its cost of debt is 2.33%. Plan B is a private firm and to estimate its cost of equity three publicly traded firms operating in the same industry have been identified, with their data presented in the table. The tax rate is 40%. a. 17.45% b. 19.97% c. 19.13% d. 20.81% e. 18.29% D/V RD RE Ro Firm 1 0.18 4.1% 9.7% Firm 2 0.55 2.3% 29.8% 18.1% Firm 3 0.28 3.7% 20.9% 17.7%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 2P
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2. Find the cost of equity of Plan B Industries if its capital structure is 25% debt and 75% equity and its cost of debt is 2.33%. Plan B is a private firm and to estimate its cost of equity three publicly traded firms operating in the same industry have been identified, with their data presented in the table. The tax rate is 40%. a. 17.45% b. 19.97% c. 19.13% d. 20.81% e. 18.29% D/V RD RE Ro Firm 1 0.18 4.1% 9.7% Firm 2 0.55 2.3% 29.8% 18.1% Firm 3 0.28 3.7% 20.9% 17.7%
Transcribed Image Text:2. Find the cost of equity of Plan B Industries if its capital structure is 25% debt and 75% equity and its cost of debt is 2.33%. Plan B is a private firm and to estimate its cost of equity three publicly traded firms operating in the same industry have been identified, with their data presented in the table. The tax rate is 40%. a. 17.45% b. 19.97% c. 19.13% d. 20.81% e. 18.29% D/V RD RE Ro Firm 1 0.18 4.1% 9.7% Firm 2 0.55 2.3% 29.8% 18.1% Firm 3 0.28 3.7% 20.9% 17.7%
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