1 suppose you are trying to estimate the after tax cost of, Ask an Expert

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1. Suppose you are trying to estimate the after tax cost of equity for a firm as part of the calculation of the weighted average cost of capital (WACC). If the risk-free rate is 4.8%, the expected market risk premium is 5.1 %, the beta is 1.4 for this firm's equity, and the corporate tax rate is 33%, what would be the expected after tax cost of equity for this firm using CARM? (Answer to the nearest tenth of a percent, but do not use a percent sign).

2. Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the weighted average cost of capital (WACC). The corporate tax rate for this firm is 34 %. The firm's bonds pay interest semiannually with a 6% coupon rate and have a maturity of 20 years. If the annual yield to maturity of the bonds is 6.68%, what is the after tax cost of debt for this firm? (Answer to the nearest hundredth of a percent, e.g. 12.34%, but do not use a percent sign.)

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Financial Management, Finance

Category:- Financial Management
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