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What is the pre-tax cost of capital for company a

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The total market value of the common stock of the Company A is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock is currently 1.5 and that the market risk premium is 6%. The Treasury bill rate is 4%. Assume for simplicity that Company A debt is risk-free. The Company's tax rate is 35%.

a) What is the pre-tax cost of capital for Company A?

b) What is the WACC for Company A?

Reference no: EM133075737

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