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Ampex common stock has a beta of 1.4. If the riskfree rate is 8 percent, the expected market return is 16 percent, and Ampex has $20 million of 8 percent debt, with a yield to m
Ampex common stock has a beta of 1.4. If the riskfree rate is 8 percent, the expected
market return is 16 percent, and Ampex has $20 million of 8 percent debt, with a yield to
maturity of 12 percent and a marginal tax rate of 50 percent, what is the weighted averagecost of capital for Ampex?
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***** ****** ***** *** a **** ** 14 If *** ********* **** ** * percent the ************** return ** ** ******* and ***** *** *** ******* of 8 ******* debt **** * ***** tomaturity ** ** ******* *** * marginal *** **** ** ** ******* what ** the weighted *********** ** ******* for Ampex?Solution:We have ** * ** D/E = * t * 50 ** * *** **** * ** Rm = ******** **** *** **** of equity *** = ** * ******** *** *** = ** * 14*(16% * *** * 8% + 14*8 * * ******** * ******* * ** * ***** *** t)*D/A * 192%*1/3 * 12 **** *** ******** * 0104 * ****