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Compute for the cost of debt

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Reference no: EM132737000

Problem - Consider a company with debt and equity of 20,000,000 and 50,000,000 respectively. A company enjoy a 12% interest rate for its liability. The market have a beta of 2.45, the risk free rate is at 5% while the equity premium is 4%. The tax rate is at 30%. Compute for the cost of debt?

a. 9.80%

b. 6 75%

c. 8 40%

d. 8.35%

Reference no: EM132737000

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