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Sagot :
The company's cost of capital with rate of return on the equity is 15% and debt is 5% is :
11 %.
What is cost of capital?
- The cost of capital is the minimum rate of return or profit that a company must achieve before it can generate value. The accounting department of a company calculates it to determine financial risk and whether an investment is justified.
Here given,
Cable Company's equity is worth $60 million in the market.
and its debt is worth $40 million in the market.
If the required rate of return on equity = 15%
And the required rate of return on debt = 5%,
We have to compute the firm's cost of capital (No taxes are assumed.)
Cost of capital = (40/100)(5%) + (60/100)(15%)
= 11%
Cost of capital for the company is 11%.
To learn more about cost of capital refer to :
https://brainly.com/question/8287701
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