Question
Suppose the debt ratio is 50%, the interest rate on new debt is 8%, the current cost of equity is 16%, and the tax rate
Suppose the debt ratio is 50%, the interest rate on new debt is 8%, the current cost of equity is 16%, and the tax rate is 40%. Assuming the firm has no preferred stock. Calculate the cost of capital. What would happen if the debt ratio (debt / total asset) increases to 60%?
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International Finance Transactions Policy And Regulation
Authors: Hal S. Scott
15th Edition
159941547X, 978-1599415475
