Calculate the cost of equity and the cost of debt

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Reference no: EM131942753

A new company called 99 cent sushi has 1000 shares outstanding that sell for $1.8 each and have a beta of 1.2. The stock market is doing rather well and the market return is 15% while the risk free rate is 3.5%. 99 cent sushi has one outstanding bond issued with a Face Value of 2000 and a coupon rate of 10%. The bond has 10 years to maturity and is currently being traded for 108% of its face value. The company is required to pay at 35% tax rate.

Calculate the following:

A) The cost of Equity:

B) The cost of Debt:

C) The capital structure weights (the percentage of the companys combined value that is from equity and debt)

Reference no: EM131942753

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