Estimating its cost of capital

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Reference no: EM13922954

Dakota Chemical Inc's dividend yield is 2%. The company pays an 8% interest rate on loans. Dakota is estimating its cost of capital.

A) Can we use 8% as the c?ost of capital? Why or why not?

B) Do you conclude that the cost of equity is lower than the cost of debt for Dakota? Explain.

Reference no: EM13922954

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