Estimated the optimal debt to capital ratio for rad

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Reference no: EM131835342

You have estimated the optimal debt to capital ratio for RAD, based upon minimizing the cost of capital, to be 50%.

a. Estimate the current cost of capital for RAD, assuming that the beta for the stock is correctly estimated at 2.3664, the cost of debt is based upon the rating estimated from the interest coverage ratio and the long term treasury bond rate is 3.7%. RAD has 916.18 million shares outstanding today, trading at $6.67 per share and $5.904 billion in debt outstanding (book as well as market).

Reference no: EM131835342

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