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The interest rate on Geothermals debt is 8%, and the corporate income tax rate is 35%. Calculate Geothermals after-tax cost of debt. We estimate Geothermals
- The interest rate on Geothermals debt is 8%, and the corporate income tax rate is 35%.
- Calculate Geothermals after-tax cost of debt.
- We estimate Geothermals beta at 1.20. Currently, the risk-free interest rate is 6% per year, and the expected rate of return on S&P 500 Index is 15%. What is the expected rate of return on Geothermals common stock, assuming that the CAPM is true?
- Calculate Geothermals weighted-average cost of capital (WACC).
Assets |
| Liabilities and Shareholders Equity |
|
Market value of assets
Total value | $647
$647 | Market value of debt $194 Market value of equity $453 Total value $647 |
|
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