What is the company cost of capital

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Reference no: EM131870178

1. CP limited has 2.5 million ordinary shares on issue with a book value of $10 per share and a current market price of $18.50 per share. The required rate of return on equity is 11%. The market value of debt is $30 million and the before-tax cost of debt is 8%. The company tax rate is 34%. What is CP limited’s WACC?

a. 7.88%

b. 9.82%

c. 6.48%

d. 8.75%

2. The shareholders and debtholders of ACL Corporation have invested $4 million and $12 million respectively. The debtholders charge an interest rate of 10 per cent whilst the shareholders require a return of 18 per cent. What is the company cost of capital?

a. 12.00%

b. 25.00%

c. 13.75%

d. 10.75%

Reference no: EM131870178

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