Intel has an ebit of 34 billion and faces a marginal tax, Ask an Expert

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Intel has an EBIT of $3.4 billion and faces a marginal tax rate of 36.50%. It currently has $1.5 billion in debt outstanding, and a market value of equity of $51 billion.

The beta for the stock is 1.35, and the pretax cost of debt is 6.80%. The Treasury bond rate is 6%.

Assume that the firm is considering a massive increase in leverage to a 70% debt ratio, at which level the bond rating will be C (with a pretax interest rate of 16%).

Estimate the current cost of capital.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92766923

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