Question
United Parcel Service, Inc has a market value of equity of $7 billion, and has a total debt of $ 3 billion. United Parcel Service,
United Parcel Service, Inc has a market value of equity of $7 billion, and has a total debt of $ 3 billion. United Parcel Service, Inc assumed statutory tax rate is 35%, its pretax borrowing rate is 4.1% and its estimated market beta is 0.5. Assume also that the expected risk-free rate is 3% and the expected market risk premium is 5%.
a. Estimate United Parcel Service, Inc cost of debt capital
b. Estimate United Parcel Service, Inc cost of equity capital
c. Estimate United Parcel Service, Inc weighted average capital
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Managerial Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac
10th Edition
B010IKDQZM
