Automatic Data Processing has a beta of 2.67 and the expected market return is 0.16. If...

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Finance

Automatic Data Processing has a beta of 2.67 and the expectedmarket return is 0.16. If Treasury bills are currently yielding0.03 percent, find the cost of capital for Automatic DataProcessing (round your answers).
none of the answers is correct
39.9%
27.5%
37.7%
34.1%
Calculate WACC given the following information (BT means beforetax).
TotalValue of Common Stocks (S) $1,000,000 Costof Equity (common stocks, Ks) 22%
TotalValue of Preferred Stocks (P) $200,000 Costof Preferred stock (Kp) 12%
TotalValue of Debt (D) $300,000 BeforeTax Cost of Debt (BT Kd) 9%
Taxrate (T) 30%
none of the answers is correct
17.53%
9.86%
20.10%
19.72%

Answer & Explanation Solved by verified expert

4.5 Ratings (975 Votes)

1Information provided Beta 267 Expected market return 016 Risk free rate 003 The cost of equity is calculated using the Capital Asset Pricing Model CAPM The formula for calculating the capital asset pricing model is given See Answer

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Automatic Data Processing has a beta of 2.67 and the expectedmarket return is 0.16. If Treasury bills are currently yielding0.03 percent, find the cost of capital for Automatic DataProcessing (round your answers).none of the answers is correct39.9%27.5%37.7%34.1%Calculate WACC given the following information (BT means beforetax).TotalValue of Common Stocks (S)$1,000,000Costof Equity (common stocks, Ks)22%TotalValue of Preferred Stocks (P)$200,000Costof Preferred stock (Kp)12%TotalValue of Debt (D)$300,000BeforeTax Cost of Debt (BT Kd)9%Taxrate (T)30%none of the answers is correct17.53%9.86%20.10%19.72%

TotalValue of Common Stocks (S)	$1,000,000	Costof Equity (common stocks, Ks)	22%
TotalValue of Preferred Stocks (P)	$200,000	Costof Preferred stock (Kp)	12%
TotalValue of Debt (D)	$300,000	BeforeTax Cost of Debt (BT Kd)	9%
		Taxrate (T)	30%