Ganado and equity risk premiums

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Reference no: EM131972617

Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 4.00% is 4.20%, the domestic beta is estimated at 1.11 the international beta is estimated at 0.87 and the company's capital structure is now 25% debt.The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.40% and the company's effective tax rate is 40%. Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates.

a. 8.40%

b. 7.30%

c. 5.30%

d. 4.30%

A1. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.40%? Round to two decimal places

A2. Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.40%? Round to two decimal places

B1. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 7.30%? Round to two decimal places

B2. Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.40%? Round to two decimal places

C1. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 5.30%? Round to two decimal places

C2. Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 5.30%? Round to two decimal places

D1. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 4.30%? Round to two decimal places

D2. Using the ICAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 4.30%? Round to two decimal places

Reference no: EM131972617

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