Question
Key facts and assumptions concerning Costco Company, at December 31, 2011, appear below. Facts and Assumptions: Rate of return on Treasury Notes 3.28% Interest rate
- Key facts and assumptions concerning Costco Company, at December 31, 2011, appear below.
| Facts and Assumptions: |
|
|
| Rate of return on Treasury Notes |
| 3.28% |
| Interest rate on company debt |
| 4.62% |
| Historical excess return on common stocks |
| 6.10% |
| Company equity beta |
| 0.80 |
| Stock price | $ | 75.08 |
| Number of shares outstanding (millions) |
| 449.5 |
| Book value of equity (millions) | $11,585 | |
| Book value of interest-bearing debt (millions) | $ | 2,524 |
| Tax rate |
| 35.00% |
Use the above information to answer the following questions:
- Estimate Costcos cost of equity capital.
- Estimate Costcos weighted-average cost of capital.
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Optimization Methods In Finance
Authors: Gerard Cornuejols, Reha Tütüncü
1st Edition
0521861705, 978-0521861700
