Tandor, Inc. (a U.S. firm) borrows U.S. funds at an interest rate of 9% per year. Its
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Tandor, Inc. (a U.S. firm) borrows U.S. funds at an interest rate of 9% per year. Its beta is 1.3. The long-term annualized risk-free rate in the U.S. is 2%. The stock market return in the U.S. is expected to be 14% annually. The company's target capital structure is 30% debt and 70% equity. The firm is subject to a 21% corporate tax rate.
(1) Calculate the after-tax cost of debt.
(2) Calculate the cost of equity.
(3) Calculate the weighted average cost of capital
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