Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 11, Problem 8P
Summary Introduction

To determine: Company’s cost of equity capital.

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WACC David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 12%, and the company's tax rate is 25%. Ortiz's CFO has calculated the company's WACC as 13.2%. What is the company's cost of equity capital? Round your answer to the nearest whole number.
David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity of its outstanding long-term debt securities is 9% and its tax rate is 40%. Ortiz's CFO calculated the company's WACC to be 9.96%. Based on the information, what is the company's cost of equity?
David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity on the company's outstanding bonds is 7%, and the company's tax rate is 25%. Ortiz's CFO has calculated the company's WACC as 9.3%. What is the company's cost of equity capital? Round your answer to the nearest whole number.   %
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