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Estimate weighted-average cost of capital

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Reference no: EM131062929

Key facts and assumptions concerning Costco Company, at December 31, 2011, appear below:

Yield to maturity on long-term government bonds: 3.28%

Yield to maturity on company long-term bonds: 4.62%

Coupon rate on company long-term bonds: 5.50%

Market price of risk, or risk premium: 6.10%

Estimated company equity beta: 0.80

Stock price per share: $75.08

Number of shares outstanding: 449.5 million

Book value of equity: $11,585 million

Book value of interest-bearing debt: $2,524 million

Tax rate: 35%

Use the above information to answer the following questions.

1. Estimate Costco's cost of equity capital.

2. Estimate Costco's weighted-average cost of capital.

Please provide calculation details

Reference no: EM131062929

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