Cost of Debt Assignment
A manufacturing firm has 60% debt and 40% equity on its balance sheet.
a.) Solve for the firm’s cost of debt if the company has a 2% probability of default, a Loss Given Default of 55%, the risk-free rate is 2.75% and the firm expects to face a marginal tax rate of 33%.
b.) Solve for the firm’s cost of equity if the firm has an equity beta of 1.25% and the market risk premium is 5%.
c.) Solve for the firm’s weighted average cost of capital (WACC)Get Finance homework help today