Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please calculate the cost of equity, it is wrong If Wild Widgets Inc. were an all-equity company, it would have a beta of 1.35. The

please calculate the cost of equity, it is wrong image text in transcribed

If Wild Widgets Inc. were an all-equity company, it would have a beta of 1.35. The company has a target debt-to-equity ratio of 0.2. The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 5.0 percent. The company has one bond issue outstanding that matures in 20 years and has a 9.0 percent coupon rate. The bond currently sells for $1,180. The corporate tax rate is 34 percent. a. What is the company's cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit % sign in your response.) b. What is the company's cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit % sign in your response.) cost of equity

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Real Estate Development Principles And Process

Authors: Mike E. Miles, Laurence M. Netherton, Adrienne Schmitz

5th Edition

0874203430, 978-0874203431

More Books

Students also viewed these Finance questions