(Answered) Question - the following financial statement data pertains

Accounting

Question - The following financial statement data pertains to ABC Company (dollar amounts in millions):

Total Assets $145,782

Interest-Bearing Debt $32,659

Average Pre-tax borrowing cost 8.25%

Common Equity:

Book Value $22,515

Market Value $65,843

Income Tax Rate 40%

Market Equity Beta 0.85

Market Premium 7.5%

Risk-free interest rate 2.2%

Required:

a. Calculate the company's cost of equity capital using CAPM.

b. Calculate the weight on debt capital that should be used to determine ABC's weighted-average cost of capital.

c. Calculate the weight on equity capital that should be used to determine ABC's weighted-average cost of capital.

d. Calculate ABC's weighted-average cost of capital.

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