Cost of equity-cost of debt and weighted average cost of


As a financial analyst, your manager has provided you with the following information. The risk-free interest rate is estimated to be 3.75%, the company’s credit risk premium is 4.5%, the domestic beta is estimated at 1.06 and the international beta at 0.90, and the company’s capital structure is 30% debt. The other values are: corporate income rate (t) at 35% for both CAPM and ICAPM, general return on market portfolio (km) at 9% domestic and 8% international. The manager asks you to calculate the following: i. Cost of equity ii. Cost of debt iii. Weighted average cost of capital.

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Financial Management: Cost of equity-cost of debt and weighted average cost of
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