Asus Company issued capital for $1,400,000 to start its new project. It issued bonds for $800,000 and acquired the remaining capital from common equity. Asus bond’s YTM is 12.5% and its common stock beta (β) is 1.5. Knowing that the risk free ( is 5% and market risk premium (MRP) is 6% and Taxes are 40%.
Questions 1→5 refers to Case One.
1. Asus weight of debt is:
2. Asus weight of common equity is:
3. The after-tax cost of debt for Asus is:
4. The cost of common equity for Asus is:
5. The Weighted Average Cost of Capital (WACC) for Asus is: