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You have been asked to calculate the cost of capital for a company with the following information. The company has $7,500,000 in face value bonds, trading at 96.5% of face value. The YTM on these bonds is 5.75%. There are also 1,000,000 shares outstanding with a book value of $4.50 per share and a market value of $9.50 per share. The equity beta is 1.75, the expected return on the market is 9%, and the risk-free rate is 2%. Given this information, what is the estimated cost of capital? There are no taxes.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91590124

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