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Tri Co. has the following cost of debt structure (14) wd 0% 20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% The market risk
Tri Co. has the following cost of debt structure (14) wd 0% 20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% The market risk premium is 4.5%, the risk free rate is 5%, beta of unleveraged firm is 1.20, Hamadas equation b= bU [1 + (1 - T)(wd/we)] Please use the above information to answer following questions: a) If the firm uses 50% debt, what is the cost of equity of the firm, based on CAPM model? b) What is WACC of the firm? c) If the firm has infinite FCF1=35 million and grow at 5% forever, what is the firms value?
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