Question
Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.30%, the company's credit risk premium is 4.10%, the domestic beta is estimated
Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.30%, the company's credit risk premium is 4.10%, the domestic beta is estimated at 1.14, the international beta is estimated at 0.84, and the company's capital structure is now 40% debt. The expected rate of return on the market portfolio held by a well-diversified domestic investor is 9.10% and the expected return on a larger globally integrated equity market portfolio is 8.00%. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 7.70% and the company's effective tax rate is 38%.
Using the domestic CAPM, what is Ganado's cost of equity?
Using the ICAPM, what is Ganado's cost of equity?
Using the domestic CAPM, what is Ganado's after-tax cost of debt?
Using the ICAPM, what is Ganado's after-tax cost of debt?
Using the domestic CAPM, what is Ganado's weighted average cost of capital?
Using the ICAPM, what is Ganado's weighted average cost of capital?
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