David Ortiz Motors: Calculate the cost of equity capital in a given situation.
David Ortiz Motors has a target capital structure of a 40% debt and 60% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.96%. What is the company's cost of equity capital?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/david-ortiz-motors-calculate-the-cost-of-equity-capital-in-a-given-situation-2sb
...h a 40% rate:
9%*(1-40%) = .09*.6 = 5.4%
The WACC is given by summing the costs of ...