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A company is 31% financed by risk-free debt. The interest rate is 9%, the expected market risk premium is 7%, and the beta of the
A company is 31% financed by risk-free debt. The interest rate is 9%, the expected market risk premium is 7%, and the beta of the companys common stock is .68.
a. What is the company cost of capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
ANSWER: Cost of capital 13.76 %
b. What is the after-tax WACC, assuming that the company pays tax at a 40% rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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