Managers in ABC Co. financed its investments with debt and equity. ABC's information is presented in...

 

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Managers in ABC Co. financed its investments with debt and equity. ABC's information is presented in the below table. Assume a perfect capital market. Equity beta Debt beta Cost of debt Risk free rate Market return D/E 1.5 0.2 12% 4% 15% 1 3.1 What's ABC's cost of equity? [1 mark] 3.2 What's ABC's cost of capital? [1 mark] 3.3 What's ABCs' asset beta? [1 mark] 3.4 If the market is perfect except for the presence of corporate tax of 30%, what's the cost of capital? [1 mark] 3.5 Why is the cost of capital in 3.4 is different from the cost of capital in 3.2. [2 marks] Managers in ABC Co. financed its investments with debt and equity. ABC's information is presented in the below table. Assume a perfect capital market. Equity beta Debt beta Cost of debt Risk free rate Market return D/E 1.5 0.2 12% 4% 15% 1 3.1 What's ABC's cost of equity? [1 mark] 3.2 What's ABC's cost of capital? [1 mark] 3.3 What's ABCs' asset beta? [1 mark] 3.4 If the market is perfect except for the presence of corporate tax of 30%, what's the cost of capital? [1 mark] 3.5 Why is the cost of capital in 3.4 is different from the cost of capital in 3.2. [2 marks]

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