Dusit is financed 30% by debt yielding 8%. Investors require a return of 15% on Dusits 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 21%?

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...

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