The spreadsheet for this problem provides key facts and assumptions concerning Montego Company, a producer of recreational equipment. It is available for download from McGraw-Hill’s Connect or your course instructor (see the Preface for more information). Using this information:

a. Estimate Montego’s cost of equity capital.

b. Estimate Montego’s weighted-average cost of capital. Prepare a table showing the relevant variables.

The following four problems test your understanding of this chapter’s Appendix.

 LO.1