Dusit is financed 30% by debt yielding 8%. Investors require a return of 15% on Dusit's equity.

Question:

Dusit is financed 30% by debt yielding 8%. Investors require a return of 15% on Dusit's equity.

a. What is the company's weighted-average cost of capital if the corporate tax rate is 35%?

b. What would be the company's cost of capital if it were exempted from corporate tax?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

Question Posted: