What is the firm required return on equity

Reference no: EM13274237

A firm has a capital structure containing 60% debt and 40% common stock. its outstanding bonds offer investor a 6.5% yield to maturity. The risk-free rate currently equals 5% and the expected risk premium on the market portfolio equal 6%. The firm's common stock bet a is 1.20

(a) What is the firm's required return on equity?
(b) Ignoring taxes, use your finding in part (a0 to calculate the firm's WACC
(c) Assuming a 40% tax rate, recaculate the firms WACC found in part (b)
(d) Compare and contrast the values for the firm's WACC found in part (b) and (c)

Reference no: EM13274237

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