Two companies, GILLETT PLC and HICKS PLC, having being categorized in the same risk class are presented with the following information : GILLETT PLC HICKS PLC $ $ Equity ($ 1 per share) 62,500,000 60,000,000 Debt - interest payable at 10% 0 2,500,000 Annual Expected earnings 2,500,000 2,500,000 (i) Assume that there are no taxes, based on the Modigliani and Miller (MM) view, calculate the Cost of equity and the Weighted Average Cost of capital for both companies.

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Answer Gillett plc Cost of equity expected return on equity 10 Hicks plc Cost of equity expected re... View the full answer