Question

David Ortiz Motors has a target capital structure of 35% debt and 65% equity. The yield to maturity on the company's outstanding bonds is 8%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.51%. What is the company's cost of equity capital? Round your answer to two decimal places.

Answer #1

Cost of equity capital = 13.58%

Calculations are given in below image

WACC
David Ortiz Motors has a target capital structure of 35% debt
and 65% equity. The yield to maturity on the company's outstanding
bonds is 12%, and the company's tax rate is 40%. Ortiz's CFO has
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of equity capital? Round your answer to two decimal places.
%

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Problem 9-8
WACC
David Ortiz Motors has a target capital structure of 30% debt
and 70% equity. The yield to maturity on the company's outstanding
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%?

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8. On January 1, the total market value of the Tysseland
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