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Co ABC’s weighted average cost of capital is 10.82 percent. The company can borrow at 7.4...

Co ABC’s weighted average cost of capital is 10.82 percent. The company can borrow at 7.4 percent. What is the cost of equity if the debt-equity ratio is .68?

1.

12.49%
2.

13.15%
3.

11.09%
4.

15.85%
5.

12.87%
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Answer #1

Finance
Co ABC’s weighted average cost of capital is 10.82 percent. The company can borrow at 7.4 percent. What is the cost of equity if the debt-equity ratio is .68?

Debt to Equity Ratio = 0.68 this implies that debt component is 0.68 and the equity component is 1 so the total capital is debt + equity, which equals, 1+0.68 = 1.68

So the correct option is option 2

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