Question
ESTA Inc. has a beta of 2, the market value of equity of $50M and the market value of assets of $83M. The corporate tax
ESTA Inc. has a beta of 2, the market value of equity of $50M and the market value of assets of $83M. The corporate tax rate is 20%. The expected risk premium on stock market is 6.3%, while the current interest rate on T-bonds is 4%. ESTA pays an 8% coupon rate on its 30-year bonds. Bonds make semiannual payments. The current price of these bonds is $1080. Estimate ESTA cost of capital.
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Managerial Finance
Authors: Alan Parkinson
1st Edition
0750618264, 978-0750618267
