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BDM's equity has a book value of $25 million and a market value of $75 million. The market value of its debt is equal to
BDM's equity has a book value of $25 million and a market value of $75 million. The market value of its debt is equal to the book value, $50 million. The companys pre-tax cost of debt is 10%. The companys stock has a beta of 1.5. Assume a corporate tax rate of 30%, a risk-free rate of 5%, and an expected market risk premium of 10%. (10 points) (a) Whats the companys cost of equity, rE? (b) Whats the companys pre-tax WACC? (c) Whats the companys after-tax WACC?
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