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A has capital Suppose you are given following information: Firm A has capital structure of x% in debt and (1-x)% in equity. Assume that expected
A has capital Suppose you are given following information: Firm A has capital structure of x% in debt and (1-x)% in equity. Assume that expected rate of returns on debt is 10% and on equity 15%. Further assume asset beta is 0.78, debt beta is 0.3 and equity beta is 1.5. (No tax rate)
a. What should be the cost of capital?
b. If risk free rate is 4.5%, what is the market risk premium? I
C. What is the unlevered cost of capital?
d. If debt is 800, what is the equity?
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