Reference no: EM132606276
Target's ROIC is 10.50%, ROE is 18.54%, Profit Margin is 4.19%, Asset Turnover is 1.50%, and Financial Leverage is 2.95%. Additionally, EBIT is $5,322 million. Book value of equity is $15,821 million. Revenues were $69,865 million, net earnings were $2,929 million, and total assets are $46,630 million.
According to its annual report, as of January 31, 2012, Target's borrowing costs averaged 4.6 percent, and its tax rate was 34.27 percent. A research report estimated Target's cost of capital at 10.5 percent. The firm had interest-bearing debt of $17,483. Moreover, Target's stock was trading at $50.81 per share, and there were 679.1 million shares outstanding. Now, let's assume Target's amount of debt is also a market value estimate of the debt. Let's also assume the current debt and equity values are at Target's optimal capital structure.
Question 1: Based on market value estimates, what is Target's cost of capital?
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: Target's ROIC is 10.50%, ROE is 18.54%, Profit Margin is 4.19%, Asset Turnover is 1.50%, Based on market value estimates, what is Target's cost of capital?
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