Question
Lamar Farms Ltd. is a levered firm with a weighted average cost of capital of 9%. Currently the company has a debt to equity ratio
Lamar Farms Ltd. is a levered firm with a weighted average cost of capital of 9%. Currently the company has a debt to equity ratio of 1.5, a before-tax cost of debt of 5.5%, and a corporate tax rate of 35%. Assume there are no bankruptcy costs.
a)What is the firm's cost of equity?
b)What is the unlevered cost of equity of Lamar Farms Limited?
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Financial Management Core Concepts
Authors: Raymond M Brooks
3rd edition
133866696, 978-0133866698
