Use the 10-year Treasury Bond rate as the risk-free rate and assume that the market risk premium is 8.5% to find Johnson & Johnson’s cost of equity. Assume that Johnson & Johnson’s bonds are rated AAA and that Johnson & Johnson’s corporate tax rate is 25%. Assume that Johnson & Johnson’s bonds have no floatation costs, but the cost of issuing equity is 3.5%. Find Johnson & Johnson’s weighted average cost of capital. Assume that the project will be financed with internal funds. You will need to find additional financial information from the Wall Street Journal and online sites to complete your calculation. Use Johnson & Johnson’s debt-to-equity ratio to compute the percentages of debt and equity.

Find: 

a.) Johnson & Johnson's cost of equity 

b.) Percentages of debt and equity 

Answer rating: 100% (QA)

Objective To calculate the johnson and johnsons cost of equity and the percentage of debt and equity Step 1 To calculate Johnson Johnsons weighted ave... View the full answer