Problem 13.1 Ganado's Cost of Capital Iviarket conditions have changed. Iviaria Gonzalez now estimates the risk-free rat

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Problem 13 1 Ganado S Cost Of Capital Iviarket Conditions Have Changed Iviaria Gonzalez Now Estimates The Risk Free Rat 1 (12.4 KiB) Viewed 9 times

Problem 13.1 Ganado's Cost of Capital Iviarket conditions have changed. Iviaria Gonzalez now estimates the risk-free rate to be 3.60%, the company's credit risk premium is 4.40%, the domestic beta is estimated at 1.05, the international beta at.85, and the company's capital structure is now 30% debt. All other values remain the same. For both the domestic CAPM and ICAPM, calculate: a. Ganado's cost of equity b. Ganado's cost of c. Ganado's weighted average cost of capital Assumptions Ganado's beta, Risk-free rate of interest, krf Company credit risk premium Cost of debt, before tax, kd Corporate income tax rate, t General return on market portfolio, km Optimal capital structure: Proportion of debt, D/V Proportion of equity, E/V a) Ganado's cost of equity ke krf + (km-krf) B b) Ganado's cost of debt, after kdx (1-t) Domestic CAPM 1.05 3.60% 4.40% 8.00% 35% 9.00% 30% 70% 8.220% 5.200% c) Ganado's weighted average d 8.049% WACC = [kex E/V]+[(kdx(1-t)) xD/V] International ICAPM 0.85 3.60% 4.40% 8.00% 35% 8.00% 30% 70% 7.340% 5.200% 6.6980%