Question
Dawn Co is financed by a medium-term bank loan and equity. The equity beta of the company is14.The after-tax cost of the bank loan is4%.The
Dawn Co is financed by a medium-term bank loan and equity. The equity beta of the company is 1·4. The after-tax cost of the bank loan is 4%. The before-tax cost of the bank loan is 3% in absolute terms above the risk-free rate of return.
The equity risk premium is 5% and the rate of corporation tax is 20%.
What is the cost of equity of Dawn Co?
8·0%
6·2%
9·0%
6·6%
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Taxation Of Individuals And Business Entities 2015
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
6th Edition
978-1259206955, 1259206955, 77862368, 978-0077862367
