The cost of Equity capital of an un-geared company in the same industry as that of company

Question:

The cost of Equity capital of an un-geared company in the same industry as that of company X is 15% and the cost of Debt capital is 10% respectively.

Company X is having a capital structure of 75% equity and 25% debt and operating in a tax world the corporate tax rate is 25%.

Calculate the Company X's

1. Cost of Equity Capital

2. Cost of Debit Capital

3. Weighted Average Cost of Capital


Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...
Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...
Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...
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Related Book For  book-img-for-question

Corporate Finance

ISBN: 9781260772388

13th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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