What is company cost of equity capital

Assignment Help Financial Management

Reference no: EM131339615

David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.26%. What is the company's cost of equity capital? Round your answer to two decimal places.

Reference no: EM131339615

Questions Cloud

Reward to risk ratio-what is the expected return : Asset A has a reward to risk ratio of .075 and a beta of 1.5. The risk-free rate is 5%. What is the expected return on A? [reward to risk ratio = (expected return on A - risk-free rate)/beta]

What is the variance of the returns on this stock : If the economy booms, Frank's Welding Supply stock is expected to return 19%. If the economy falls into a recession, the stock's return is projected at 5%. The probability of a boom is 80% while the probability of a recession is 20%. What is the vari..

How the rate of discount that equalizes the two options : A high school graduate has to decide between working and going to college. If he works, he will work for the next 50 years of his life. If he goes to college, he will be in college for 5 years, and then work for 45 years. discuss how the rate of disc..

Two separate divisions : Swizer Industries has two separate divisions. Division X has less risk so its projects are assigned a discount rate equal to the firm's WACC minus .75 percent. Division Y has more risk and its projects are assigned a rate equal to the firm's WACC plu..

What is company cost of equity capital : David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.26%. What is the comp..

Target capital structure : Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 30%, rd = 6%, rps = 7.9%, and rs = 14%. If Shi has a target capital structure of 30% debt, 5% preferre..

What is estimated cost of common equity using capm : Booher Book Stores has a beta of 0.4. The yield on a 3-month T-bill is 3.5% and the yield on a 10-year T-bond is 6%. The market risk premium is 7%, and the return on an average stock in the market last year was 15%. What is the estimated cost of comm..

Considering three-year expansion project-what is project npv : Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.82 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. If the required return is 12 ..

What is the company cost of preferred stock and rps : Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $74.50 per share with an annual dividend of $4.00 a share. Ignoring flotation costs, what is the company's cost of preferred stock, rps?

User Account

All Pages