Jupiter, Inc. has equity with a market value of $9.9 million and outstanding debt with a market value of $4.4 million and a current yield to maturity of 8.0%. The risk-free rate is 2% and the expected return on the market is 10%. The levered beta of the company is 1.27. The firm pays no taxes.
1) What would be the proper calculation to find the company's debt/equity ratio.
2) Determine the company's cost of capital.
3) Determine the unlevered beta and the cost of capital for an identical all-equity firm.