Calculate the ?ganado after-tax cost of debt

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Reference no: EM132841088

Maria? Gonzalez, Ganado's Chief Financial? Officer, estimates the? risk-free rate to be 3.30%?, the? company's credit risk premium is 3.70?%, the domestic beta is estimated at 1.11?, the international beta is estimated at 0.86?, and the? company's capital structure is now 25?% debt. The expected rate of return on the market portfolio held by a? well-diversified domestic investor is 9.20?% and the expected return on a larger globally integrated equity market portfolio is 8.10%. The? before-tax cost of debt estimated by observing the current yield on? Ganado's outstanding bonds combined with bank debt is 8.50?% and the? company's effective tax rate is 38?%.

Problem 1: For both the domestic CAPM and? ICAPM, calculate the? following:

a. Ganado's cost of equity

b. ?Ganado's after-tax cost of debt

c. Ganado's weighted average cost of capital

Reference no: EM132841088

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