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Compute the relevant cost of capital that should be used

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Reference no: EM132504585

Bridgetron

An analyst wants to value the sum of the debt and equity capital of the firm and is provided with the following information:

Total Assets$25,675

Interest-Bearing Debt$18,525

Average Pre-tax borrowing cost9.25%

Common Equity: Book Value$8,950

Market Value$34,956

Income Tax Rate35%

Market Equity Beta1.05

Risk-free Rate3.80%

Market Premium5.70%

Question 1: An analyst wants to value the common shareholders' equity of Bridgetron, compute the relevant cost of capital that should be used.

Reference no: EM132504585

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