Disregard your answers above. Now, assume that the cosmetic business has a valuation of $1,442 million...

 

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Disregard your answers above. Now, assume that the cosmetic business has a valuation of $1,442 million and a beta of 0.6 with a perpetual growth rate of 4%, and the coal mining business has a valuation of $969 million and a beta of 1.2 with a perpetual growth rate of 1%. Suppose the risk-free rate is 2% and the market risk premium is 5%. Eastern Inc. is an all-equity firm. What is Eastern Inc's current cost of capital? (Hint: first, need to calculate the current equity beta for Eastern Inc.) Note: Enter your final answers in percentage points in X.X format. e.g. if your answer is 10.654%, enter 10.7 Disregard your answers above. Now, assume that the cosmetic business has a valuation of $1,442 million and a beta of 0.6 with a perpetual growth rate of 4%, and the coal mining business has a valuation of $969 million and a beta of 1.2 with a perpetual growth rate of 1%. Suppose the risk-free rate is 2% and the market risk premium is 5%. Eastern Inc. is an all-equity firm. What is Eastern Inc's current cost of capital? (Hint: first, need to calculate the current equity beta for Eastern Inc.) Note: Enter your final answers in percentage points in X.X format. e.g. if your answer is 10.654%, enter 10.7

Answer rating: 100% (QA)

To calculate Eastern Incs current cost of capital we first need to find its equity beta using the be... View the full answer