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What is targets cost of capital

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According to its annual report, as of January 31, 2012, Target's borrowing costs averaged 4.6 percent, and its tax rate was 34.27 percent. A research report estimated Target's cost of capital at 10.5 percent. The firm had interest-bearing debt of $17,483. Moreover, Target's stock was trading at $50.81 per share, and there were 679.1 million shares outstanding. Now, let's assume Target's amount of debt is also a market value estimate of the debt. Let's also assume the current debt and equity values are at Target's optimal capital structure.

Question 1: Based on market value estimates, what is Target's cost of capital?

Question 2: How does it compare to Walmart's, and what explains the difference?

Reference no: EM132467729

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