Solution-Compute ron ltd weighted average cost of capital

Compute ron ltd weighted average cost of capital

Reference no: EM131520232

Could you please help me out with these two questions? Thanks a lot.

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an alpha of 1.56%. The market has an expected return of 10% and the risk-free rate is 4 %.

What is the alpha for the fad followers? Enter your answer as a percentage to two decimal places (i.e. 0.12% rather than 0.0012; the percent sign is not necessary).

RON Ltd has the following capital structure components:

Five million shares issued with a current market price of 5. Equity holders require a 11% return.

10 million face value of Corporate bonds outstanding. These bonds pay an annual coupon of 6% and currently trade at a yield to maturity of 6%.

If the firm faces a corporate tax rate of 30%, compute RON Ltd's Weighted Average Cost of Capital (WACC). Enter your answer in decimal form to FOUR decimal places. For example 10.34%, would be entered as 0.1034

Reference no: EM131520232

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Compute ron ltd weighted average cost of capital

Reference no: EM131520232

Reference no: EM131520232

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