Cost of Debt/Equity Assignment
February 18th, 2020
Epson has one bond outstanding with a yield to maturity of 6% and a coupon rate of 8%. The company has no preferred stock. Epson’s beta is 1.5, the risk-free rate is 1% and the expected market risk premium is 6%. Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%.
What is Epson’s (pre-tax) cost of debt?
What is Epson’s cost of equity?
What is Epson’s capital structure weight for equity, i.e., the fraction of long- term capital provided by equity? Get Finance homework help today