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Which is the capital cost and the debt cost

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Reference no: EM132769692

The company ABC has a capital of $ 35,000,000 the debt consists in perpetuity bonds with an annual payment of $0.84 millions by coupon and currently they have a market value of $14,000,000. The government bonds will pay 6% annually and the market performance for the next year it is expected in 13% annual. The betha of the capital is of 1.15 The company does not pay taxes.

Problem 1: Which is the following is the equity debt ratio?

a) 1/4

b) 3/4

c) 0.4

d) 4

Problem 2: Which is the capital cost (RS) and the debt cost(RB)?

a) 12.90% and 2.4%

b) 20.95% and 5.0%

c)14.05% and 6%

d)13% and 6%

Reference no: EM132769692

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