Question
Please calculate a firms WACC (weighted average cost of capital) using the following information: The firms ROE is 12% and its Payout Ratio is 40%
Please calculate a firms WACC (weighted average cost of capital) using the following information:
The firms ROE is 12% and its Payout Ratio is 40% The firm has 9 million shares outstanding, each of which trades at a price of $11. The firm expects to pay a dividend of $1.50 at the end of the year. The firm has outstanding debt with a face value of $70 million. These are all 20-year bonds with a 5% coupon (paid semi-annually) and they are selling at a price of $1,352.11 per $1,000 bond. The yield on Treasury bills is 2.5%. The return on the market is 7%. The firms beta is 2. The firms tax rate is 30%. What is the firms cost of equity using CAPM Model?
Multiple Choice 19.5% 15.5% 17.5% 11.5%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started