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Category > Business & Finance Posted 19 May 2017 My Price 7.00

Key facts and assumptions

Chapter 8 Problem 20            
               
Key facts and assumptions concerning Kroger Company, at December 12, 2007, appear below. Using this information, answer the questions following.    
               
  Facts and Assumptions            
  Yield to maturity on long-term government bonds 4.54%          
  Yield to maturity on company long-term bonds 6.32%          
  Coupon rate on company long-term bonds 7.50%          
  Market price of risk, or risk premium 6.30%          
  Estimated company equity beta                1.05          
  Stock price per share $          25.97          
  Number of shares outstanding              681.2 million        
  Book value of equity $           4,965 million        
  Book value of interest-bearing debt $           6,674 million        
  Tax rate 35.0%          
               
               
               
a. Estimate Kroger's cost of equity capital.            
               
b. Estimate Kroger's weighted-average cost of capital. Prepare a spreadsheet or table showing the relevant variables.    
               
               
               
 

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Status NEW Posted 19 May 2017 04:05 AM My Price 7.00

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