Question
Kappa Corporation has $20 million of outstanding equity and $5 million of bank debt. The estimated equity beta is 2.5. The bank debt costs 4%
Kappa Corporation has $20 million of outstanding equity and $5 million of bank debt. The estimated equity beta is 2.5. The bank debt costs 4% per year.
Assume that the market risk premium is 8%, the risk-free rate is 3%, and the firm's tax rate is 25%.
What is the Weighted Average Cost of Capital of the firm? Round your answer to two decimals. If the answer is 10.42% input 10.42.
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
