Suppose a company uses only debt and internal equity to finance its capital budget and uses CAPM to compute its cost of equity. Company estimates that its WACC is 15%. Company Debt to Equity 2.33. Before tax cost of debt is 8% and tax rate is 30%. Risk free rate is rRF = 7% and market risk premium (rm — rRF) = 12%. What is the beta of the company?

Suppose a company uses only debt and internal equity to finance its capital budget and uses CAPM to compute its cost of equity. Company estimates that its WACC is 15%. Company Debt to Equity 2.33. Before tax cost of debt is 8% and tax rate is 30%. Risk free rate is rRF = 7% and market risk premium (rm — rRF) = 12%. What is the beta of the company?

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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