1.) Amazon Inc. has a weighted average cost of capital (ignoring taxes) of 11 percent....
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Accounting
1.) Amazon Inc. has a weighted average cost of capital (ignoring taxes) of 11 percent. It can borrow at 8 percent. Assuming that Amazon has a target capital structure of 75 percent equity and 25 percent debt, what is its cost of equity?
2.) Chipotle is an unlevered firm with a market value of $10 billion and a tax rate of 25 percent. According to M&M Proposition I with taxes, what would the value of Chipotle be if they borrowed $4 billion and used the money to repurchase their shares? Enter your answer in billions (e.g., enter 5,250,000,000 as 5.25).
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