A firm is firanced with market values of $295 million in nsk-free debt and $575 million in equity. The firm's asset beta is 0.93. Assume a risk-free rate of 2.5%, a market risk-premium of 6.2% and a tax rate of 25%. Assume the firm's debt beta is 0. What is the firms after- tax weighted average cost of capital? (answer to the fourth decimal place)
A firm is firanced with market values of $295 million in nsk-free debt and $575 million in equity. The firm's asset beta is 0.93. Assume a risk-free rate of 2.5%, a market risk-premium of 6.2% and a tax rate of 25%. Assume the firm's debt beta is 0. What is the firms after- tax weighted average cost of capital? (answer to the fourth decimal place)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm is firanced with market values of $295 million in nsk-free debt and $575 million in equity. The firm's asset beta is 0.93. Assume a risk-free rate of 2.5%, a market risk-premium of 6.2% and a tax rate of 25%. Assume the firm's debt beta is 0. What is the firms after- tax weighted average cost of capital? (answer to the fourth decimal place)
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