Company cost of equity capital-david ortiz motors, Accounting Basics

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Company cost of equity capital-david ortiz motors

Problem:

David Ortiz Motors has a target capital structure of 45% debt and 55% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.18%.

Required:

Question: What is the company's cost of equity capital?

Note: Explain all calculation and formulas.

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Accounting Basics: Company cost of equity capital-david ortiz motors

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Accounting Basics: Company cost of equity capital-david ortiz motors

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