Determine what is the company cost of capital

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Reference no: EM13205185

A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company's common stock is .5.

Risk Free Debt Interest Rate Market Risk Premium Beta Taxes
40% 10% 8% 0.5 35%

a. What is the company cost of capital?
b. What is the after-tax WACC, assuming that the company pays tax at a 35% rate?

Step 1:
r(d)= F
r(e)= C
D/V C
E/V C

Step 2:
a. Formula Calculation Cost of Capital T C

b. WACC T C

Reference no: EM13205185

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