Unlevered Cost of Equity Elliott's Cross Country Transportation Services has a capital structure with 30% debt at a 7% interest rate. Its beta is 1.7, the risk-free rate is 3%, and the market risk premium is 8%. Elliott's combined federal-plus-state tax rate is 25%. a. What is Elliott's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. 8.1 % b. What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal places. 6.98 % c. What is its unlevered cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. % Hide Feedback Incorrect
Unlevered Cost of Equity Elliott's Cross Country Transportation Services has a capital structure with 30% debt at a 7% interest rate. Its beta is 1.7, the risk-free rate is 3%, and the market risk premium is 8%. Elliott's combined federal-plus-state tax rate is 25%. a. What is Elliott's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. 8.1 % b. What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal places. 6.98 % c. What is its unlevered cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. % Hide Feedback Incorrect
Chapter7: Types And Costs Of Financial Capital
Section: Chapter Questions
Problem 11EP
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Transcribed Image Text:Unlevered Cost of Equity
Elliott's Cross Country Transportation Services has a capital structure with 30% debt at a 7% interest rate. Its beta is 1.7, the
risk-free rate is 3%, and the market risk premium is 8%. Elliott's combined federal-plus-state tax rate is 25%.
a. What is Elliott's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places.
8.1
%
b. What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal
places.
6.98
%
c. What is its unlevered cost of equity? Do not round intermediate calculations. Round your answer to two decimal places.
%
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