Question
A firm is 85% equity. T-Bills are expected to return 2%. The effective tax rate is 8%. It has 65% of its debt in bonds
A firm is 85% equity. T-Bills are expected to return 2%. The effective tax rate is 8%. It has 65% of its debt in bonds denominated in euros and 35% in US dollar. The euro debt has a euro YTM of 5.5%; the US dollar debt has a YTM of 6.5%. The 1-year LIBOR rate in euros is 3.5%; in USD is 4.5%. The firms global beta 1.10. Assume a global risk premium of 6%.
- What is the cost of equity?
- What is the cost of debt of the firm overall?
- What is the WACC?
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Surviving In General Management
Authors: Philip Berman, Pauline Fielding
1st Edition
9780333483145
