Calculate the company cost of capital

Assignment Help Financial Management

Reference no: EM13934351

The market value of Cable Company's equity is $60 million, and the market value of its risk-free debt is $40 million. If the required rate of return on the equity is 15% and that on the debt is 5%, calculate the company's cost of capital. (Assume no taxes.)

Reference no: EM13934351

Questions Cloud

Commercial print shop : Martin Becker, age 64, owns and manages a commercial print shop in Maine. Martin plans to retire this year and has recently accepted an offer to sell this company for 1.8 million. Both children are married and currently employed. Dave has one son age..

Capita spending on health care : As of 2015, per capita spending on health care in the United States was about $9000. If this amount increased by 5 percent a year, what would be the amount per capita spending for health care in 12 years?

Initial cost of the hotel project for the use of this land : The Green Tomato purchased a parcel of land six years ago for $299,500. At that time, the firm invested $64,000 grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land..

Start-up cost of the project to get the true-total cost : Southern Alliance Company needs to raise $22 million to start a new project. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 65 percent common stock, 10 percent preferred stock, a..

Calculate the company cost of capital : The market value of Cable Company's equity is $60 million, and the market value of its risk-free debt is $40 million. If the required rate of return on the equity is 15% and that on the debt is 5%, calculate the company's cost of capital. (Assume no ..

Consider the mean-variance portfolio optimization : Consider the mean-variance portfolio optimization with n risky assets, but no short sales. Write down the first order optimality conditions of the problem. Can you characterize the set of efficient portfolio?

What is the firms operating cash flow : An all-equity firm has net income of $28,300, depreciation of $7,500, and taxes of $2,050. What is the firm's operating cash flow?

Should the trailer be exempt from the bankruptcy estate : In 2008 Virgil Hurd was kicked out of his home by his ex-wife. At that time he moved into his horse trailer (the “Trailer”) to keep warm. The Trailer is twenty feet long and six feet wide. Virgil gets electricity for the Trailer from a socket and wat..

How does this event affect the demand for money : You put money into an account that earns a 5 percent nominal interest rate. Theinflation rate is 3 percent, and your marginal tax rate is 20 percent. What is your after-tax real rate of interest? Suppose that changes in bank regulations expand the av..

User Account

All Pages