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You are tasked with estimating the cost of capital for a firm. The risk-free rate is 4.6%, the expected rate of return on the market
You are tasked with estimating the cost of capital for a firm. The risk-free rate is 4.6%, the expected rate of return on the market is 17.6%. Now, another similar company (similar unlevered cost of capital) has a debt-to-equity ratio of 1 to 2. It has a debt beta near zero and an equity market-beta of 1.6. Your own firm has more debt, for a debt-to-equity ratio of 1 to 1, with a debt beta of 0.2. What is a good estimate for your firm's cost of capital (WACC)?
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