Compute the firm cost of equity

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Reference no: EM13951520

Suppose today is January 1, 2016; on January 1, 2006, XYZ industries issued a 30-year bond with a 5% coupon, paid semi-annually, and a $1,000 face value payable on January 1, 2036. The bond now sells for $975. Assume a 34% tax rate. Suppose the market risk premium is 3.5%, the T-bill rate is 1% and XYZ Industries has a beta equal to 1.35. Use the SML to compute the firm's cost of equity. Assume the debt/equity ratio for xyz industries is 30. Calculate the wacc.

Reference no: EM13951520

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