Question
i.You have a capital structure consisting of 30% debt and 70% equity. There is an 8% yield to maturity. The risk-free rateis 5%, and the
i.You have a capital structure consisting of 30% debt and 70% equity. There is an 8% yield to maturity. The risk-free rateis 5%, and the market risk premiumis 6%. Using the CAPM, the cost of equity is currently 12.5%. There is 40% tax rate.
a. Calculate current WACC?
b. Calculate the current beta on common stock?
c. Calculate the beta if you had no debt in the capital structure, that is unlevered beta?
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Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
7th Edition
013213683X, 978-0132136839
