Cameron Corp. has a target capital structure of 40% debt and 60% equity. The company's tax...

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Question

Cameron Corp. has a target capital structure of 40% debt and 60% equity. The companys tax rate is 30% and the yield to matur

Answer 1

Answer #1

WACC = Cost of debtWeight of debt+Cost of equityWeight of equity
Substituting available values, we have
9.6 = 12(1-30%)40%+rs*60%, where rs = Cost of
equity.
Solving for rs,
rs = (9.6-120.70.4)/0.6 =	10.40%

Answer 2

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