Question

Suppose the Simmons Co's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent. The yield to maturity in the firm’s bonds is 7.6 percent and the debt-equity ratio is .45.

What is the cost of equity of this firm?

What is the WACC if the tax rate is 34 percent?

Answer 1