Homework Answers
| After tax rate = YTM * (1-Tax rate) |
| After tax rate = 8.467 * (1-0.26) |
| After tax rate = 6.2656 |
| Total Capital value = Value of Equity + Value of Debt |
| =129.45+60.99 |
| =190.44 |
| Weight of Equity = Value of Equity/Total Capital Value |
| = 129.45/190.44 |
| =0.6797 |
| Weight of Debt = Value of Debt/Total Capital Value |
| = 60.99/190.44 |
| =0.3203 |
| Cost of Capital = Weight of Equity*Cost of Equity+Weight of Debt*Cost of Debt |
| Cost of Capital = 0.12782*0.6797+0.062656*0.3203 |
| Cost of Capital = 0.1070 |
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