Question
Shares of the Pacific Electric Corporation have an estimated beta of 1.10. PEC funds its assets with 50 percent debt at an average after-tax cost
Shares of the Pacific Electric Corporation have an estimated beta of 1.10. PEC funds its assets with 50 percent debt at an average after-tax cost of debt of 6 percent. The excess return on the market portfolio is 5 percent and the risk-free-rate is 3 percent.
a. What is Pacific Electric Corporation's estimated cost of equity according to the CAPM?
B. What is Pacific Electric Corporation's weighted average cost of capital?
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Regulation Of Securities Markets And Transactions
Authors: Patrick S. Collins
1st Edition
0470601965, 978-0470601969
