Question
Tri Co. has the following cost of debt structure: Please show all work. w d 0% 20% 30% 40% 50% r d 0.0% 9.0% 10.0%
- Tri Co. has the following cost of debt structure: Please show all work.
| 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)]. Tax rate T = 40%.
Please use the above information to answer following questions:
a. If the firm uses 40% debt, what is the cost of equity of the firm, based on CAPM model?
b. What is WACC of the firm?
c. If FCF0 = 150 million, g=3%, what is the firm value?
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Investing In The Trump Era How Economic Policies Impact Financial Markets
Authors: Nicholas P. Sargen
1st Edition
3319760440,3319760459
