Question 2

\fall Verizon LTE 10:18 AM 0 0147% chegg.com Problem 2 You have been asked to calculate the cost of equity for three firms- BlastAir, LandAir, and BalAir. You know the following: Beta Cost of Debt Debt/Assets BlastAir 1.35 4.5% 55% LandAir 1.30 5.25% 47% BalAir 1.33 5.4% 33% You know the following: - 10-year Treasury yield = 4.40% market premium = 5.5% average tax rate = 21% What are the expected returns on equity and WACCs for each of these firms