Bridgetron
an Analyst Wants to Value the Sum of the Debt

question 28

Essay

Bridgetron
An analyst wants to value the sum of the debt and equity capital of the firm and is provided with the following information:
$\begin{array}{l}\begin{array}{l}\text { Total Assets } \\\text { Interest-Bearing Debt } \\\text { Average Pre-taxborrowing cost } \\ \text { Common Equity: } \\\text { Book Value } \\\text { Market Value } \\\text { Income Tax Rate } \\\text { Market Equity Beta } \\\text { Risk-free Rate }\\\text { Market Premium }\\\end{array}\begin{array}{lll}\$ 25,675\\\$ 18,525 \\9.25 \% \\\\\$ 8,950 \\\$ 34,956 \\35 \% \\1.05 \\3.8 \% \\5.7\%\end{array}\end{array}$
-An analyst wants to value the common shareholders' equity of Bridgetron,compute the relevant cost of capital that should be used.