# Corporate Finance Quiz Assignment

Words: 269

Annual depreciation = \$300,000/5 = 60,000 Depreciation for 3 years = 180,000 kick value = 300,000 – 180,000 = 120,000 Answer A market value of its risk-free debt is \$5 million. The beta of the company’s common stock is 1. 25, and the market risk premium is 8%. If the Treasury bill rate is 5%, what is the company’s cost of capital? Ignore taxes. (CAMP, Chapter 8) b. 14. 6% Response: re = 5+ 15 ; rd + 12 = Answer C = 5%; Company Cost of capital = 5 (5/25) + Use this information to answer questions 8 and 9: Manmade is a full service broker that is considering expanding into internet roughage business.

The project is expected to last 5 years. The firm has market capitalization (market value of assets) of \$1 billion and it has a market value of Debt/ Equity ratio of 0. 5. Trade is a pure internet brokerage Company and it has an equity beta of 1. 2 and a debt beta of 0. 2. Trade has 60% debt and 40% equity in market value terms. The 5-year Treasury (risk free) rate is 5% per year and the risk premium on the market is 5%. What is your estimate of the cost of capital for Madras’s investment in the internet brokerage business?