Air Asia has 1.4 million shares of stock outstanding. The stock currently sells for $20 per share. The firm’s debt is publicly traded and was recently quoted at 93% of face value. It has a total face value of $5 million, and it is currently priced to yield 11%. The risk-free rate is 8%, and the market risk premium is 7%. You’ve estimated that Air Asia has a beta of 0.74. If the corporate tax rate is 34%, what is the Weighted Average Cost of Capital of Air Asia
Air Asia has 1.4 million shares of stock outstanding. The stock currently sells for $20 per share. The firm’s debt is publicly traded and was recently quoted at 93% of face value. It has a total face value of $5 million, and it is currently priced to yield 11%. The risk-free rate is 8%, and the market risk premium is 7%. You’ve estimated that Air Asia has a beta of 0.74. If the corporate tax rate is 34%, what is the Weighted Average Cost of Capital of Air Asia
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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Air Asia has 1.4 million shares of stock outstanding. The stock currently sells for $20 per
share. The firm’s debt is publicly traded and was recently quoted at 93% of face value. It
has a total face value of $5 million, and it is currently priced to yield 11%. The risk-free
rate is 8%, and the market risk premium is 7%. You’ve estimated that Air Asia has a beta
of 0.74. If the corporate tax rate is 34%, what is the Weighted Average Cost of Capital of
Air Asia?
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