Alton Enterprises has an after-tax cost of debt of 3.85%. Your online investigation reveals that the company has a beta of 0.90. Assume that the risk free rate in 2017 is 3.0% and an appropriate "spread" of equities over the risk-free rate is 3.5%. The company has 60% of its capitalization from equity.
Calculate the company's weighted average cost of capital for 2017.

Question

Alton Enterprises has an after-tax cost of debt of 3.85%. Your online investigation reveals that the company has a beta of 0.90. Assume that the risk free rate in 2017 is 3.0% and an appropriate "spread" of equities over the risk-free rate is 3.5%. The company has 60% of its capitalization from equity. 
Calculate the company's weighted average cost of capital for 2017.

Quizplus · Accepted Answer

The Answer of Alton Enterprises has an after-tax cost of debt of 3.85%. Your online investigation reveals that the company has a beta of 0.90. Assume that the risk free rate in 2017 is 3.0% and an appropriate "spread" of equities over the risk-free rate is 3.5%. The company has 60% of its capitalization from equity. 
Calculate the company's weighted average cost of capital for 2017.

Alton Enterprises Has an After-Tax Cost of Debt of 3