Rex inc has equity with a market value of 25 million and, Ask an Expert

Finance

Rex Inc. has equity with a market value of $25 million and debt with a market value of $8 million.

Treasury bills that mature in one year yield 6 percent per year, and the expected return on the market portfolio is 13 percent. The beta of Rex's equity is 1.25. The firm pays no taxes.

a. What is the firm's debt-equity ratio?

b. What is the firm's weighted average cost of capital?

c. What is the cost of capital for an otherwise identical all-equity firm?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93059991

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