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Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 4.00%, the company's credit risk premium is 4.30%,
Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 4.00%, the company's credit risk premium is 4.30%, the domestic beta is estimated at 1.17, the international beta is estimated at 0.84, and the company's capital structure is now 35% debt. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.00% and the company's effective tax rate is 30%. Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates. a. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.80%? 1% (Round to two decimal places.) Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.80%? 1% (Round to two decimal places.) b. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 7.70%? 1% (Round to two decimal places.) Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 7.70%? 1% (Round to two decimal places.) c. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 5.70%? 1% (Round to two decimal places.) Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 5.70%? 1% (Round to two decimal places.) d. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 4.80%? 1% (Round to two decimal places.) Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 4.80%? % (Round to two decimal places.)
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