Duques Corp. is 100% equity financed. Its cost of equity is 12%. The firm plans to issue bond to repurchase 40% of its shares. The firm’s investment bankers have informed her that since the new issue of bond is risky, bond holders will demand 6%, which is 2% above the risk-free rate. The beta of unlevered stock is 1.0. A. Calculate the new company cost of capital B. Calculate the new cost of equity. C. Calculate the new asset beta (????), the bond beta (????) and the new equity beta (????
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Duques Corp. is 100% equity financed. Its
A. Calculate the new company cost of capital
B. Calculate the new cost of equity.
C. Calculate the new asset beta (????), the bond beta (????) and the new equity beta (????
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