What is weighted average cost of capital

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Reference no: EM131955579

Corcovado Pharmaceuticals. Corcovado Pharmaceutical's cost of debt is 7.60%. The risk-free rate of interest is 4.00%. The expected return on the market portfolio is 8.60%. Corcovado's effective tax rate is 39%. Its optimal capital structure is 75% debt and 25% equity.

Please answer the following questions? ?(Round to two decimal? places.)

1. If Corcovado's beta is estimated at 1.80 what is its weighted average cost of capital?

2. If Corcovado's beta is estimated at 1.40, significantly lower because of the continuing profit prospects in the global energy sector, what is its weighted average cost of capital?

Reference no: EM131955579

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