30 Cost of Capital Acetate SA has equity with a market value of 20 million and debt...

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30 Cost of Capital Acetate SA has equity with a market value of €20 million and debt with a market value of

€10 million. Treasury bills that mature in one year yield 8 per cent per year, and the expected return on the market portfolio over the next year is 18 per cent. The beta of Acetate’s equity is 0.90. The firm pays no taxes.

(a) What is Acetate’s debt–equity ratio?

(b) What is the firm’s weighted average cost of capital?

(c) What is the cost of capital for an otherwise identical all-equity firm?

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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Question Posted: Jul 19, 2024 06:02 PM

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30 Cost of Capital Acetate SA has equity with a market value of 20 million and debt...

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Corporate Finance

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