A publicly traded firm has a beta of 1.2 and debt ratio of 20%. The firm...
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A publicly traded firm has a beta of 1.2 and debt ratio of 20%. The firm is looking to expand its operations and also targeting a debt ratio of 45%. If the risk-free rate is 3% and the (expected) market risk-premium is 7%, what is the cost of equity that the firm should use in its (weighted average) cost of capital calculations? A publicly traded firm has a beta of 1.2 and debt ratio of 20%. The firm is looking to expand its operations and also targeting a debt ratio of 45%. If the risk-free rate is 3% and the (expected) market risk-premium is 7%, what is the cost of equity that the firm should use in its (weighted average) cost of capital calculations?
Expert Answer:
Answer rating: 100% (QA)
The cost of equity Ke can be calculated using the Capital Asset Pricing Model CAPM which is Ke Rf Rm ... View the full answer
Related Book For
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
Posted Date:
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