Subi6519
Feb 19, 2013, 06:56 PM
Please Help!!
Sprint Nextel Corporation (S) has $22.1 billion in total debt (which approximates its market value.) Each year this debt costs the company about $1.5 billion in interest expense. The company's market capitalization approximates $17.2 billion, its market beta is estimated 2.12, and its marginal tax rate is 35%. Assume that the risk-free rate equals 4.6% and the market premium equals 5%.
(a) Estimate Sprint Nextel's cost of debt capital. (Round your answer to one decimal place.)
Sprint Nextel Corporation (S) has $22.1 billion in total debt (which approximates its market value.) Each year this debt costs the company about $1.5 billion in interest expense. The company's market capitalization approximates $17.2 billion, its market beta is estimated 2.12, and its marginal tax rate is 35%. Assume that the risk-free rate equals 4.6% and the market premium equals 5%.
(a) Estimate Sprint Nextel's cost of debt capital. (Round your answer to one decimal place.)