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Cost of Capital 2
Cost of Capital 2
1000 - 925
Yield to Maturity = 88 + 25
925 x 60% + 1000 x 40%
Yield to Maturity = 88 + 3
555 + 400
Yield to Maturity = 91
955
Kd = 9.53% x (1-30%)
Kd = 9.53% x 70%
Kd = 6.67%
1
Kp = 100 x 10%
95 - 2.5
Kp = 10
92.5
Kp = 10.81%
CASE A
D1 D1
Ke = + G Kn = + G
P0 P0 - FC
4.5 4.5
Ke = + 6% Kn = + 6%
60 60 - 4
4.5
Ke = 0.075 + 6% Kn = + 6%
56
Ke = 13.50% Kn = 0.0804 + 6%
Kn = 14.04%
CASE B
Ke = D1 + G Kn = D1 + G
P0 P0 - FC
3.27 3.27
Ke = + 9% Kn = + 9%
60 60 - 3.5
3.27
Ke = 0.0545 + 9% Kn = + 9%
56.5
Ke = 14.45% Kn = 0.0579 + 9%
Kn = 14.79%
D1 = D0 X (1 + G)
D1 = 3 x (1 + 9%)
D1 = 3 x 109.00%
D1 = 3.27
Cost of Capital = RF + [β x (MR - RF)]