Description of this paper

The total book value of Okefenokee Real Estate Com...

Description

Solution


Question

The total book value of Okefenokee Real Estate Company is $6 million, and the total book value of its debt is $4 million. The treasurer estimates that the beta of the stock is currently 1.2 and that the expected risk premium on the market is 10 percent (i.e., RPm = (rmkt ? rrf ) = 10%). The Treasury note rate (rrf) is 4 percent. Estimate the weighted average cost of capital (WACC) assuming the cost of debt is 14% (rd = 14%) and a tax rate of 40 percent.

 

Paper#8823 | Written in 18-Jul-2015

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