Question: Below you are given information on Efaw, Inc.s capital structure as well as information on Efaws stock and bonds. Compute Efaws cost of capital. Capital
- Below you are given information on Efaw, Inc.s capital structure as well as information on Efaws stock and bonds. Compute Efaws cost of capital.
| Capital Structure | |
| Book Value of Debt | $2,000,000,000 |
| Market Value of Debt | $2,500,000,000 |
| Book Value of Equity | $3,500,000,000 |
| Market Value of Equity | $4,000,000,000 |
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| Stock Info |
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| Beta | 1.32 |
| Risk free rate | 1.25% |
| Market risk premium | 7.50% |
| Cost of issuing equity | 5% |
| Bond Info |
|
| Coupon rate | 6% |
| Years to mat;urity | 22 |
| Par value | $1,000 |
| Price of bond | $963.75 |
| Cost of issuing debt | 2.50% |
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