PT Nusantara is financed with debt, preferred equity, and common equity with market values of $20 million, $10 million, and $30 million, respectively. The betas for the debt, preferred stock, and common stock are 0.2, 0.5, and 1.1, respectively. If the risk-free rate is 3.95 percent, the market risk premium is 6.01 percent, and the company’s average and marginal tax rates are both 30%, what is the company’s weighted average cost of capital?
PT Nusantara is financed with debt, preferred equity, and common equity with market values of $20 million, $10 million, and $30 million, respectively. The betas for the debt, preferred stock, and common stock are 0.2, 0.5, and 1.1, respectively. If the risk-free rate is 3.95 percent, the market risk premium is 6.01 percent, and the company’s average and marginal tax rates are both 30%, what is the company’s weighted average cost of capital?
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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PT Nusantara is financed with debt, preferred equity, and common equity with market values of $20 million, $10 million, and $30 million, respectively.
The betas for the debt, preferred stock , and common stock are 0.2, 0.5, and 1.1, respectively.
If the risk-free rate is 3.95 percent, the market risk premium is 6.01 percent, and the company’s average and marginal tax rates are both 30%, what is the company’s weighted average cost of capital?
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