Compute the cost of capital for your company

Reference no: EM133633414

Question: You are a manager of the Valero Energy, the O&G company that focuses on downstream activities. The company finances around 63% of its projects with long term debt and the rest with the equity. It pays a corporate tax rate of 10% and the cost of debt is 4.18%. Your computations suggest that your company is less risky than average firm in your sub-sector and has a market beta of 0.70. Assuming that a risk-free rate is 1%, compute the cost of capital for your company and compare it with the average cost of debt for your subsector. Cost of Capital for Valero Energy is: rWACC

Reference no: EM133633414

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