Question
How to calculate cost of equity I would like to know how to calculate cost of equity. I have only the below information so far.
How to calculate cost of equity
I would like to know how to calculate cost of equity. I have only the below information so far.
Yield to maturity of debt : 8%
Market value of debt : $100 million
Number of shares of common stock : 10 million
Price per share of common stock : $30
WACC : 10.82%
Marginal tax rate : 35%
Also in comparison with similar companies, here is the debt to total capital ratios
Debt to total capital ratio (%) Cost of debt (%) Cost of equity (%)
20 7.7 12.5
30 8.4 13.0
40 9.3 14.0
50 10.4 16.0
Cost of equity formula should be rr + B + (E(rm-rr) but do not know which one is risk free rate, beta, and risk premium.
Or is there a different formula to be used for the cost of equity?
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