Question: With the above information, how is the CPT I/Y calculated to get 3.9268? - Equity - Debt Information Information - $1 billion in - 50

With the above information, how is the CPT I/Y calculated to get 3.9268? - Equity - Debt Information Information - $1 billion in

With the above information, how is the CPT I/Y calculated to get 3.9268?

- Equity - Debt Information Information - $1 billion in - 50 million shares outstanding debt - $80 per share (face value) - Beta =1.15 - Current quote = - Market risk 110 premium =9% - Coupon rate =9%, - Risk-free rate =5%ll These are things we can use to find out cost - 15 years to maturity of equity and cost of debt within the firm . Tax rate =40% - RE=5+1.15(9)=15.35% Risk free rate + beta risk premium - What is the cost of debt? =Y YM on current LT debt

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