Calculate the cost of capital for operations (WACC). Use the capital asset pricing model to estimate the
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Question:
Calculate the cost of capital for operations (WACC). Use the capital asset pricing model to estimate the cost of equity capital.
U.S Government long term bond rate 4.3%
Market risk premium. 5.0%
Equity beta. 1.3
Per share market price $40.70
Shares outstanding 58 million
Net financial obligations on balance sheet $1,750 million
Weighted average borrowing cost 7.5%
Statutory tax rate 36.0%
Required;
1) Explain why the cost of capital for operations is different from that for equity.
Related Book For
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher
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