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Acetate Inc

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jrosamond | 00:05 Tue 31st May 2005 | Business & Finance
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Acetate Inc, has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14% per annum. Treasury bills that mature in one year yield 8% per annum and the expected return on the market portfolio over the next year is 18%. The beta of Acetate's equity is 0.9%. The firm pays no taxes.


What is the cost of capital for an otherwise identical all equity firm?

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