analysis for financial management, chapter 8 problem 20.

The spreadsheet for this problem provides key facts and assumptions concerning Montego Company, a producer of recreational equipment. It is available for donwload on McGraw-Hill's Connect ofr your course instructor (see the Preface for more imformation). 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.

Facts and Assumptions
Yield to maturity on long-term government bonds	4.54%
Yield to maturity on company long-term bonds	6.32%
Coupon rate on company long-term bonds	7.50%
Market price of risk, or risk premium	6.30%
Estimated company equity beta	1.05
Stock price per share	$ 25.97
Number of shares outstanding	681.2	million
Book value of equity	$ 4,965	million
Book value of interest-bearing debt	$ 6,674	million
Tax rate	35.0%