Shares of the Pacific Electric Corporation have an estimated beta of 1.10. PEC funds its assets with
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Question:
Shares of the Pacific Electric Corporation have an estimated beta of 1.10. PEC funds its assets with 50 percent debt at an average after-tax cost of debt of 6 percent. The excess return on the market portfolio is 5 percent and the risk-free-rate is 3 percent.
a. What is Pacific Electric Corporation's estimated cost of equity according to the CAPM?
B. What is Pacific Electric Corporation's weighted average cost of capital?
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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