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Kilborn Corporations balance sheet is shown below. The current rate on treasury bonds is 7%. The yield to maturity on Kilborns bonds is 10%. Assume
Kilborn Corporations balance sheet is shown below. The current rate on treasury bonds is 7%. The yield to maturity on Kilborns bonds is 10%. Assume a market risk premium of 8%. Kilborns tax rate is 40%. Kilborns stock price is $45, and it has 2 million shares outstanding. Kilborns beta is unknown because it only recently went public, but it is known that a comparable firms stock has a beta of 1.2 and that the comparable firms debt ratio (D/(D+E)) is 0.4. What is the weighted-average cost of capital for Kilborn Corporation?
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