Use this information about TNT Corporation for the next three questions, 31-33. Currently, TNT's balance...
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Use this information about TNT Corporation for the next three questions, 31-33. Currently, TNT's balance sheet is as follows: Assets Liabilitie:s $10 billion $40 billion Total assets $50 billion Total debt & common equity $50 billion Assets $50 billion Debt Common equity The book value of the company (both debt and common equity) equals its market value (both debt and common equity). Furthermore, the company has determined the following information The company estimates that its before-tax cost of debt is 7.5% The company estimates that its levered beta is 1.1. The risk-free rate is 5% The market risk premium is 6% The company's tax rate is 40 percent. . In addition, TNT is considering a recapitalization. The proposed plan is to issue $10 billion worth of debt and to use the money to buy back $10 billion worth of common stock. As a result of this recapitalization, the firm's size will not change 31. What is its current cost of common equity (before the proposed recapitalization)? a. b. C. d. 5.92% 10.08% 10.18% 9.88%
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