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Messan Co. (a U.S. firm) borrows U.S. funds at an interest rate of 10 percent per year. Its beta is 1.2. The long-term annualized risk-free
Messan Co. (a U.S. firm) borrows U.S. funds at an interest rate of 10 percent per year. Its beta is 1.2. The long-term annualized risk-free rate in the United States is 5 percent. The stock market return in the United States is expected to be 16 percent annually. Messan's target capital structure is 20 percent debt and 80 percent equity. Messan Co. is subject to a 30 percent corporate tax rate. Estimate the cost of capital to Messan Co. Do not round intermediate calculations. Round your answer to two decimal places.
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