Finance

groban · #1 Jul 16, 2006, 10:39 AM

Florida Appliances has equity with a market value of $40 million and debt with a market value of $20 millions. The cost of the debt is 6 percent semi-annually. Treasure bills that mature in one year yield 5 percent per annum, and the expected return on the market portfolio over the next year is 15 percent. The beta of Florida Appliances is .8. The firm pays no taxes.

1) what is Florida debt-equity ratio?

2) what is the firm's weighted average cost of capital?

3) what is the cost of capital for an otherwise identical all equity-firm?



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