International Financial Management 6th Edition by Sanjiv Eun, Cheol Resnick, Bruce Sabherwal

تمرين 5

The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 12 percent and its before-tax borrowing rate is 8 percent. Given a marginal tax rate of 35 percent, calculate (a) the weighted-average cost of capital, and (b) the cost of equity for an equivalent all-equity financed firm.