What is the estimated cost of common equity

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Reference no: EM132011235

1. National Bank just issued a new 40-year, non-callable bond at par. This bond requires a coupon rate of 14% with semiannual payments and has a par value of $1,000. The tax rate is 25%. What is the after-tax cost of debt?

2. Pan American Airlines' shares are currently trading at $69.59 each. The yield on Pan Am's debt is 8% and the firm's beta is 1.2. The Canadian Government Bond rate is 2.5% and the expected return on the market is 6.5%. The? company's target capital structure is 65% debt and 35 % equity. Pan American Airlines pays a combined tax rate of 45%. What is the estimated cost of common equity, employing the Capital Asset Pricing Model? (CAPM)?

Reference no: EM132011235

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