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Tri Co. has the following cost of debt structure: The market risk premium is 4.5%, the risk free rate is 3.5%, beta of unleveraged firm
- Tri Co. has the following cost of debt structure: The market risk premium is 4.5%, the risk free rate is 3.5%, beta of unleveraged firm is 1.10, Hamadas equation b= bU [1 + (1 - T)(wd/we)]. T=30%.
Please use the above information to answer following questions:
wd | 0% | 20% | 30% | 40% | 60% |
rd | 0.0% | 9.0% | 10.0% | 11.0% | 13.0% |
- If the firm uses 60% debt, what is the cost of equity of the firm, based on CAPM model?
- What is WACC of the firm?
- If FCF0 = 500 million, g=5%, what is the firm value?
Please show work and formulas. Use Excel
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