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7.2. Consider the financial information of Harding Hotels and Young Inns, the two hotel chains. Company Debt/Assets Cost of debt Tax rate Harding Hotels 27%
7.2. Consider the financial information of Harding Hotels and Young Inns, the two hotel chains.
| Company | Debt/Assets |
| Cost of debt | Tax rate |
| Harding Hotels | 27% | 1.35 | 10% | 34% |
| Young Inns | 30% | ? | 8% | 32% |
At present, the risk-free rate is 3.1% and the expected return on the market 11%. Find the weighted average cost of capital for Young.
Answer: 11.55% PLEASE SHOW SOLUTIONS
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