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Question - Estimating Weighted Average Cost of Capital

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Question - Estimating Weighted Average Cost of Capital

Mattel, Inc. engages in the design, manufacture, and marketing of various toy products worldwide. At December 31, 2015, Mattel's market value of equity was $9.2 billion, and its total market value was $11.3 billion. Mattel's assumed statutory tax rate was 37%, its average pretax borrowing rate was 4.1%, and its estimated market beta was 0.94. Assume also that the expected risk-free rate is 2.5% and the expected market risk premium is 5%.

Required -

a. What does Mattel's market beta imply about its stock returns?

b. Estimate Mattel's cost of debt capital, cost of equity capital, and weighted average cost of capital.

Reference no: EM132715435

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