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You are trying to estimate the cost of capital for two companies (A Ltd and B Ltd). You have collected the information below relating to
You are trying to estimate the cost of capital for two companies (A Ltd and B Ltd). You have collected the information below relating to the companies and the market in general. Use this information to help answer the questions that follow. - The risk-free rate is 3%. - The tax-adjusted market risk premium (TAMRP) is 7.5%. - The corporate and investor tax rates are both assumed to be 28%. (a) According to the simplified Brennan Lally CAPM, the cost of equity for A Ltd is %. Note: Please provide your answer with two decimal points in the format of xx.xx (for example, if the answer is 12.345%, type in 12.34). (b) Using the cost of debt, cost of equity, market value of debt and market value of equity given in the table above, the weighted average cost of capital (WACC) for B Ltd is %. Note: Please provide your answer with two decimal points in the format of xx.xx (for example, if the answer is 12.345\%, type in 12.34)
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