The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 12 percent, and its before-tax borrowing rate is 10 percent. Given a marginal tax rate of 35 percent. Required: a. Calculate the weighted-average cost of capital. b. Calculate the cost of equity for an equivalent all-equity financed firm. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the weighted-average cost of capital. Note: Do not round intermediate calculations. Round your answer as a percent rounded to 2 decimal places. 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.
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The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 12 percent, and its before-tax borrowing rate
is 10 percent. Given a marginal tax rate of 35 percent.
Required:
a. Calculate the weighted-average cost of capital.
b. Calculate the cost of equity for an equivalent all-equity financed firm.
Complete this question by entering your answers in the tabs below.
Required A
dA Required B
Calculate the weighted-average cost of capital.
Note: Do not round intermediate calculations. Round your answer as a percent rounded to 2 decimal places.
Weighted-average cost of capital
< Required A
Required B >
Transcribed Image Text:The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 12 percent, and its before-tax borrowing rate is 10 percent. Given a marginal tax rate of 35 percent. Required: a. Calculate the weighted-average cost of capital. b. Calculate the cost of equity for an equivalent all-equity financed firm. Complete this question by entering your answers in the tabs below. Required A dA Required B Calculate the weighted-average cost of capital. Note: Do not round intermediate calculations. Round your answer as a percent rounded to 2 decimal places. Weighted-average cost of capital < Required A Required B >
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