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The following financial statement & market value data pertains to Southwater Inc., a manufacturer of women's suits (in million USD): Table 6 Financial Statement &

The following financial statement & market value data pertains to Southwater Inc., a manufacturer of women's suits (in million USD):

Table 6

Financial Statement & Market Value Data Pertains to Southwater Inc.

1

Total Assets

$154,287

2

Interest-Bearing Debt

$33,984

3

Average Pre-tax borrowing cost

7.75%

4

Book Value Equity

$21,365

5

Market Value Equity

$66,735

6

Income Tax Rate

39.6%

7

Market Equity Beta

0.77

8

Market Risk Premium

7.45%

9

Risk-free Rate

2.5%

  1. Calculate the company's cost of equity capital.
  2. Calculate the weight on debt capital that should be used to determine Northridges weighted-average cost of capital.
  3. Calculate the weight on equity capital that should be used to determine Northridges weighted-average cost of capital.
  4. Calculate Northridges weighted-average cost of capital.

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