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Deep Mines has 43,800 shares of common stock outstanding with a beta of 1.54 and a market price of $51 a share. The 8 percent semiannual bonds have a face value of $1,000 and are selling at 96 percent of par. There are 2,000 bonds outstanding that mature in 13 years. The expected rate of return on the market is 7.5 percent, T-bills are yielding 3.6 percent, and the tax rate is 21 percent. What is the cost of equity? 14.38 percent 11.28 percent 15.15 percent 10.73 percent 9.61 percent

Deep Mines has 43,800 shares of common stock outstanding with a beta of 1.54 and a market price of $51 a share. The 8 percent semiannual bonds have a face value of $1,000 and are selling at 96 percent of par. There are 2,000 bonds outstanding that mature in 13 years. The expected rate of return on the market is 7.5 percent, T-bills are yielding 3.6 percent, and the tax rate is 21 percent. What is the cost of equity? 14.38 percent 11.28 percent 15.15 percent 10.73 percent 9.61 percent

Essentials Of Investments
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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Deep Mines has 43,800 shares of common stock outstanding with a beta of 1.54 and a market price of $51 a share. The 8 percent semiannual bonds have a face value of $1,000 and are selling at 96 percent of par. There are 2,000 bonds outstanding that mature in 13 years. The expected rate of return on the market is 7.5 percent, T-bills are yielding 3.6 percent, and the tax rate is 21 percent. What is the cost of equity? 14.38 percent 11.28 percent 15.15 percent 10.73 percent 9.61 percent
Transcribed Image Text:Deep Mines has 43,800 shares of common stock outstanding with a beta of 1.54 and a market price of $51 a share. The 8 percent semiannual bonds have a face value of $1,000 and are selling at 96 percent of par. There are 2,000 bonds outstanding that mature in 13 years. The expected rate of return on the market is 7.5 percent, T-bills are yielding 3.6 percent, and the tax rate is 21 percent. What is the cost of equity? 14.38 percent 11.28 percent 15.15 percent 10.73 percent 9.61 percent
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