Firm XYZ has 7 million shares outstanding, with a book value of $10 per share and a market price of $25 per share. In addition, the firm has 150,000 bonds outstanding, matured in 10 years, with a par value of $1,000, selling at 96% of par. Bonds pay semiannual coupons of 4.20%. The firm's beta is 1.05, the risk-free rate is 3.75%, and the market risk premium is 7.20%. The tax rate is 21%. 

What is the firm's cost of capital?

Answer rating: 100% (QA)

To calculate the cost of capital we can use the weighted average cost of capital WACC formula WACC EVRe DVRd1 Tc Where E is the market value of equity ... View the full answer