Question
3. FM Foods is evaluating its cost of capital. Use the following information provided on December 31, 2017, to estimate FM's after-tax cost of equity
3. FM Foods is evaluating its cost of capital. Use the following information provided on December 31, 2017, to estimate FM's after-tax cost of equity capital.
Yield to maturity on long-term government bonds: 4.4%
o Yield to maturity on company long-term bonds: 6.3%
o Coupon rate on company long-term bonds: 7%
o Historical excess return on common stocks: 6.5%
o Company equity beta: 1.20
o Stock price: $40.00
o Number of shares outstanding (millions): 240
o Book value of equity (millions): $5,240
o Book value of interest-bearing debt (millions): $1,250
o Tax rate: 35.0%
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Financial Management For Public Health And Not For Profit Organizations
Authors: Steven A. Finkler
4th International Edition
0132912813, 9780132912815
