Question
This is two cases of Corp Finance ( Please use WACC and CAPM) Try to do it in handwriting please so I can make it
This is two cases of Corp Finance ( Please use WACC and CAPM) Try to do it in handwriting please so I can make it on a paper.
Company A's historical returns for the past three years are: 6.0%, 15%, and 15%. Similarly, the market portfolio's returns were: 10%, 10%, and 16%. Suppose the risk-free rate of return is 4%. What is the cost of equity capital (required rate of return of company A's common stock), computed with the CAPM?
The market value of XYZ Corporation's common stock is $40 million and the market value of its risk-free debt is $60 million. The beta of the company's common stock is 0.8, and the expected market risk premium is 10%. If the Treasury bill rate is 6%, what is the firm's cost of capital? ( Assume taxes are 15%)
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