A company has the following liabilities and equity on its balance sheet: Current Liab $20M L-T Debt
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Question:
A company has the following liabilities and equity on its balance sheet:
Current Liab $20M
L-T Debt $40M
Equity $50M
The firm has 2 million shares outstanding with a current market price of $51 per share. In addition, you know that 30-year Treasury securities are yielding 2.7%, the company's debt is rated BBB, which carries a typical default spread of 2.5% . The company's equity has a beta of 1.0, and the market risk premium is 5%. The company has $28M of excess cash on its balance sheet. The company's tax rate is 30%.
What is this company's cost of capital in %, to two decimals? (i.e, if you calculate .12345, enter 12.35)
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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