What is the cost of equity and the company tax rate

Reference no: EM13204008

Question

Below is ABC Shipping's source of capital structure:

Source of capital	Market Value			Cost
Long-tenn debts	$ 8	500	000	5.0%
Preference shares	$ 1	500	000	14.0%
Ordinary shares	$15	000	000	?

The ordinary sl are equity has a beta of 1.2. The risk-free rate is 6% and the market return is 11%.

a What is the cost of equity?

b The company tax rate is 30%. Calculate the Weighted Average Cost of Capital (WACC) for the company.

Reference no: EM13204008

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