MNC’s cost of Capital Slater Co. is a U.S.-based MNC that finances all of its operations with debt and equity. It borrows U.S. funds at an interest rate of 11 percent per year. The long-term risk-free rate in the United States is 7 percent. The stock market return in the United States is expected to be 15 percent annually. Slater’s beta is 1.4. Its target capital structure is 20 percent debt and 80 percent equity. Slater Co. is subject to a 30 percent corporate tax rate (federal and state combined). Estimate the cost of capital to Slater Co.
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.