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Key facts and assumptions concerning Montego Company, a producer of recreational equipment, appear below. Using this information, answer the following questions. 2 KE Estimate Montego's cost of equity capital by using the CAPM equation. b. Estimate Montego's weighted average cost of capital. Prepare a table showing the relevant variables. Amount ($ millions) 3 Source Debt Equity 4.00% 10 Facts and Assumptions Yield to maturity on long-term government bonds Yield to maturity on company long-term bonds Coupon rate on company long-term bonds (semiannual coupon payments) Current quote on company long-term bonds (on 1/1/2019) Original issue date Maturity date Market price of risk, or risk premium Estimated company equity beta Stock price per share Number of shares outstanding (million) Book value of equity (million) Book value of interest-bearing debt (million) Tax rate 12 13 14 15 16 17 7.00% $98.25 1/1/14 12/31/33 6.00% 1.10 $15.55 785.2 $9,965 $12,774 25.0% 18 Key facts and assumptions concerning Montego Company, a producer of recreational equipment, appear below. Using this information, answer the following questions. 2 KE Estimate Montego's cost of equity capital by using the CAPM equation. b. Estimate Montego's weighted average cost of capital. Prepare a table showing the relevant variables. Amount ($ millions) 3 Source Debt Equity 4.00% 10 Facts and Assumptions Yield to maturity on long-term government bonds Yield to maturity on company long-term bonds Coupon rate on company long-term bonds (semiannual coupon payments) Current quote on company long-term bonds (on 1/1/2019) Original issue date Maturity date Market price of risk, or risk premium Estimated company equity beta Stock price per share Number of shares outstanding (million) Book value of equity (million) Book value of interest-bearing debt (million) Tax rate 12 13 14 15 16 17 7.00% $98.25 1/1/14 12/31/33 6.00% 1.10 $15.55 785.2 $9,965 $12,774 25.0% 18