Homework Answers
Answer : 17.0 percent.
Explanation:
Let the required cost of equity capital = X
Cost of capital = [(Cost of debt after tax * 50 %) + Cost of equity * 50%)]
11 % = [(6% * 80% * 50%) + 0.50 X]
2.40 + 0.50 X = 11
0.50 X= 8.6
X = 17.2.
The required cost of equity capital closet to 17 %.
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