Problemthe market value of npu ice creamery equity is 8, Ask an Expert

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Problem:

The market value of NPU Ice Creamery equity is $8 million and the market value of its debt is $6 million, with book value of debt at $2 million and the book value of equity at $2.5 million. The CFO estimates that the beta of the stock current is 1.43 and that the expected risk premium on the market is 8%. The Treasury bill rate is 3%. The coupon rate on the company's debt is 5%, and the Yield to Maturity is 5.5%.

Required:

Question: Estimate the Weighted Average Cost of Capital assuming a tax rate of 40%.

Please explain in detail and also show all workings.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147521

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