Question: Using the following data, answer a-e. Please show all work step by step. Thank you so much! Xena Corp. Total assets $21,249 Interest-bearing debt(market value)
Using the following data, answer a-e. Please show all work step by step. Thank you so much!
Xena Corp.
Total assets $21,249
Interest-bearing debt(market value) $11,070
Average borrowing rate for debt 10.2%
Common Equity:
Book Value $5,535
Market Value $23,247
Marginal income tax rate 19%
Market Beta 1.64
a) Assuming that the risk free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's cost of equity capital, using the capital asset pricing model:
i) 10.2%
ii) 13.6%
iii) 15.2%
iv) 14.7%
b) Calculate Xena's cost of debt capital
i) 8.3%
ii) 13.5%
iii) 3.2%
iv) 10.2%
c) Determine the weight on debt capital that should be used to calculate Xena's weighted-average cost of capital
i) 52.1%
ii) 67.0%
Iii) 32.0%
iv) 47.6%
d) Determine the weight on equity capital that should be used to calculate Xena's weighted- average cost of capital
i) 33.3%
ii) 71.9%
iii) 67.7%
iv) 54.9%
e) Assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted- average cost of capital
i) 13.2%
ii) 10.7%
iii) 10.4%
iv) 12.6%
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