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Find what is the weighted average cost of capital

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Reference no: EM132885109

Problem 1: A stock with a beta of 2.0 has an expected return of 22%. Another stock with a beta of 0.5 has an expected return of 7%. What should be the risk free rate if the SML relationship holds?

Problem 2: The pretax cost of debt for a firm is 6% and the cost of equity is 12%. If the firm's tax rate is 25% and the market value of equity is 60% of the market value of the firm what is its weighted average cost of capital?

Reference no: EM132885109

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