Question
Cost of capital Wright Express (WE) has a capital structure of30% debt and 70% equity. WE is considering a project that requires an investment of$2.6
Cost of capital
Wright Express (WE) has a capital structure of30% debt and 70% equity. WE is considering a project that requires an investment of$2.6 million. To finance this project, WE plans to issue 10-year bonds with a coupon interest rate of 12%. Each of these bonds has a $1,000 face value and will be sold to net WE $980. If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for WE? Assume WE has a beta of 1.20 and a marginal tax rate of 40%.
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| equity |
allocation | ?? |
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maturity | ?? |
| risk free rate | ?? |
coupon rate | ?? |
| market return | ?? |
par | ?? |
| beta | ?? |
price | ?? |
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tax rate | ?? |
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nper | ?? |
| rf | ?? |
pmt | ?? |
| rm | ?? |
pv | ?? |
| rm - rf | ?? |
fv | ?? |
| beta | ?? |
type | ?? |
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bond yield |
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rate | ?? |
| rf + beta * (rm - rf) | ?? |
tax rate |
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cost of debt | ?? |
| cost of equity | ?? |
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cost of capital | ?? |
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