businessfinancefinance questions and answersSuppose You Have Estimated Your Company’s Beta As 1.1, And You Expect The Market Return To …Question: Suppose You Have Estimated Your Company’s Beta As 1.1, And You Expect The Market Return To Be 5% And The Risk-free Rate 1%. Which ONE Of The Following Statements Is FALSE? A. Using The Securities Market Line, The Company’s Cost Of Equity Is 6.5%. B. If The Company S Market Value Of Equity Is £200 Million, And The Market Value Of Its Debt Is £100 Million, …This problem has been solved!See the answerSuppose you have estimated your company’s beta as 1.1, and you
expect the market return to be 5% and the risk-free rate 1%. Which
ONE of the following statements is FALSE?
A. Using the Securities Market Line, the company’s cost of
equity is 6.5%.
B. If the company s market value of equity is £200 million, and
the market value of its debt is £100 million, we calculate the
weighted average cost of capital (WACC) as 2/3 of the cost of
equity plus 1/3 of the after-tax cost of debt.
C. The company s after-tax WACC is 4.53%.
D. (None of the statements is false.)
E. If the pre-tax cost of debt is 4% and the corporate tax rate
is 30%, the after-tax cost of debt is 2.8%.
Expert Answer 100% (1 rating)
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