G4X Inc. is a publicly-traded company with 25 million shares outstanding. The stock last traded at $10 a share and has a levered beta of 1.4. G4X Inc. has a $25 million bond outstanding on which it makes $1 million interest-only payments each year with 5 years left to maturity. In addition, G4X Inc. has operating leases with required lease payments of $2 million a year for the next five years. Moody rates the bond Baa which has a current default spread of 1.5%. The current marginal tax rate is 37%. The current risk-free rate is 2.0%, and the current equity risk premium is 6.0%. What is the current cost of capital for G4X Inc?

Answer rating: 100% (QA)

A B Calculation of current cost of capital Particulars Amount Noof shares 25000000 4 Co... View the full answer