Answere and solution of 121314 12. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailingcredit spread of 3%, tax rate of 30% and Equity ratio of 30%, UsingCAPM method compute for the cost of equity.100VALUATION CONCEPTS AND METHODOLOGIESa. 9.00%6 77%C. 8.00%d. 8.77%13. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%,market return of 8%, prevailing credit spread of 3%, tax rate of 30%and Equity ratio of 30%, compute for the volatility of stocks or Beta.а. 1.00b. 1.25C. 1.50d. 1.7514. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%,market return of 8%, prevailing credit spread of 3%, tax rate of 30%and Equity ratio of 30%, compute for the after tax cost of debt.a. 4.90%b. 5.00%C. 7.00%d. 10.00%

12 Calculate cost of equity using CAPM model as shown below: Cost of equity Risk free…

Answered: compute for the after tax cost of debt.

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compute for the after tax cost of debt.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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Answere and solution of

12. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing
credit spread of 3%, tax rate of 30% and Equity ratio of 30%, Using
CAPM method compute for the cost of equity.
100
VALUATION CONCEPTS AND METHODOLOGIES
a. 9.00%
6 77%
C. 8.00%
d. 8.77%
13. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%,
market return of 8%, prevailing credit spread of 3%, tax rate of 30%
and Equity ratio of 30%, compute for the volatility of stocks or Beta.
а. 1.00
b. 1.25
C. 1.50
d. 1.75
14. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%,
market return of 8%, prevailing credit spread of 3%, tax rate of 30%
and Equity ratio of 30%, compute for the after tax cost of debt.
a. 4.90%
b. 5.00%
C. 7.00%
d. 10.00%

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