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Chapter 8 Problem 20 Key facts and assumptions concerning Kroger Company, at December 12, 2007, appear below. Using this information, answer the questions following. Facts
| Chapter 8 Problem 20 | |||||||
| Key facts and assumptions concerning Kroger Company, at December 12, 2007, appear below. Using this information, answer the questions following. | |||||||
| Facts and Assumptions | |||||||
| Yield to maturity on long-term government bonds | 4.54% | ||||||
| Yield to maturity on company long-term bonds | 6.32% | ||||||
| Coupon rate on company long-term bonds | 7.50% | ||||||
| Market price of risk, or risk premium | 6.30% | ||||||
| Estimated company equity beta | 1.05 | ||||||
| Stock price per share | $ 25.97 | ||||||
| Number of shares outstanding | 681.2 | million | |||||
| Book value of equity | $ 4,965 | million | |||||
| Book value of interest-bearing debt | $ 6,674 | million | |||||
| Tax rate | 35.0% | ||||||
| a. | Estimate Kroger's cost of equity capital. | ||||||
| b. | Estimate Kroger's weighted-average cost of capital. Prepare a spreadsheet or table showing the relevant variables. | ||||||
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