Homework: Mylab Chapter 13 Assignment Question 1, Problem 13-3 (algorithmic) Part 6 of 6 HW Score: 33.33%, 0.67 of 2 points Save Points: 0.67 of 1 Ganado's Cost of Capital. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.30%, the company's credit risk premium is 3.70%, the domestic beta is estimated at 1.16, the international beta is estimated at 0.91, and the company's capital structure is now 25% debt. The expected rate of return on the market portfolio held by a well-diversified domestic investor is 9.10% and the expected return on a larger globally integrated equity market portfolio is 8.20%. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.60% and the company's effective tax rate is 40%. For both the domestic CAPM and ICAPM, calculate the following: a. Ganado's cost of equity b. Ganado's after-tax cost of debt c. Ganado's weighted average cost of capital a. Using the domestic CAPM, what is Ganado's cost of equity? 10.03% (Round to two decimal places.) Using the ICAPM, what is Ganado's cost of equity? 7.76% (Round to two decimal places.) b. Using the domestic CAPM, what is Ganado's after-tax cost of debt? 5.16% (Round to two decimal places.). Using the ICAPM, what is Ganado's after-tax cost of debt? 5.16% (Round to two decimal places.) c. Using the domestic CAPM, what is Ganado's weighted average cost of capital? 8.81% (Round to two decimal places.) Using the ICAPM, what is Ganado's weighted average cost of capital? % (Round to two decimal places.) |||