Chapter 8 Problem 20
Key facts and assumptions concerning Kroger Company, at December 12, 2007, appear below. Using this information, answer the questions following.
	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%
a.	Estimate Kroger's cost of equity capital.
b.	Estimate Kroger's weighted-average cost of capital. Prepare a spreadsheet or table showing the relevant variables.