Question: Assume that TJX changes its capital structure so that its market value weight of debt to capital increases to 30%, and its after-tax interest rate

Assume that TJX changes its capital structure so that its market value weight of debt to capital increases to 30%, and its after-tax interest rate on debt at this new leverage level is 3.5%. Assume that the equity market risk premium is 6.7%. What will be the cost of equity at the new debt level? What will be the new weighted average cost of capital?

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The first task is to compute the new equity beta The beta of TJXs assets will not change since its a... View full answer

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