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Firm A has an outstanding debt of $500,000,000 and the debt-equity ratio is 1. Suppose Firm A's debt has AAA credit rating, therefore, is considered
| Firm A has an outstanding debt of $500,000,000 and the debt-equity ratio is 1. Suppose Firm A's debt has AAA credit rating, therefore, is considered risk-free. The current equity beta of Firm A's stock is 1.2 and the average equity market risk premium is 5%. If the current long-term risk-free rate is 4% and the tax rate is 21%. |
| What is the cost of debt for Firm A? |
| What is the cost of equity for Firm A? |
| What are the capital structure ratios D/V and EV? |
| What is the WACC for Firm A? |
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