Question
Question: A company has 10 million shares outstanding and current share price of $40 pre share. Its debt is risk-free.This debt has a term to
Question:
A company has 10 million shares outstanding and current share price of $40 pre share. Its debt is risk-free.This debt has a term to maturity of four years, has annual coupons with a coupons with a coupon rate of 6%. A company has EBIT of $106 million. Which is expected to remain constant each year. New capital expenditures are expected to equal description and equal $13 million per year, While no changes to net working capital are expected in the future. The corporate tax rate is 40%. A company is expected to keep its debt-equity ratio constant in the future(by either issuing additional new debt or buying back some debt as time goes on)
Problem:
a. Estimate A company's WACC
b. What is A company's equity cost of capital
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