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Compute the after-tax cost of equity

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Reference no: EM132288727

Required rate of return (i.e., profit) on the firm's debts (i.e., bonds) (Y) is 2.4%

=

= 0.024

Required rate of return (i.e., profit) by the firm's common stockholders (kcs) is 7.2%

= 0.072

Corporation is facing corporate tax rate of 40.1%

After-tax cost of debt (kd) = 0.024 × (1 - 0.401)

After-tax cost of debt (kd) = 0.024 - 0.009624

After-tax cost of debt (kd) = 0.014376

Rounding to the nearest thousandths is 0.014

After-tax cost of debt (kd) = 0.014

Or, after-tax cost of financing for debt (kd) is 0.014

What do I do to get or compute the after-tax cost of equity?

Reference no: EM132288727

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