Cost of capital for an otherwise identical all-equity firm

Assignment Help Financial Management

Reference no: EM131856984

Question: Acetate, Inc., has equity with a market value of $22.3 million and debt with a market value of $1...

Acetate, Inc., has equity with a market value of $22.3 million and debt with a market value of $11.15 million. The cost of debt is 8 percent per year. Treasury bills that mature in one year yield 4 percent per year, and the expected return on the market portfolio is 10 percent. The beta of Acetate’s equity is 1.08. The firm pays no taxes.

I figured out that debt-equity ratio is .43 and WACC is 9.65, but need help with the following:

What is the cost of capital for an otherwise identical all-equity firm? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Reference no: EM131856984

Questions Cloud

High frequency of thunderstorms in central colorado : What geographic feature might contribute to the high frequency of thunderstorms in central Colorado and northeastern new mexico?

Anticipate and rebut potential reasons : Develop a PowerPoint presentation suitable for your colleagues that illustrates how online learning modules can fill gaps and support meaningful.

What is the implication of the efficient markets hypothesis : What is the implication of the efficient markets hypothesis for finance managers and their decision making process?

Discuss what happens when adaptive quadrature is used : Discuss what happens when adaptive quadrature is used to integrate the function y = 1/x in the interval (-1, 2].

Cost of capital for an otherwise identical all-equity firm : What is the cost of capital for an otherwise identical all-equity firm?

Formulate a linear programming model for the problem : The manager wants to know the number of each type of biscuit to prepare each morning in order to maximize profit.

Autumn season and advection fog : Near the shore of a very large lake, explain why steam fog is more likely to form during the autumn season and advection fog is more likely to form

Compute the original owner holding period return : Compute the original owner’s holding period return if the bond is originally purchased for $4,700.

Why are evaporative coolers often used in arizona : Why are evaporative coolers often used in Arizona, Nevada, and California but not nearly so often in Florida, Georgia, or Indiana?

User Account

All Pages