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What is the firm cost of equity capital

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Question - Xerox Corporation's tax rate is 21 percent. The firm's pre-tax cost of debt is 10 percent; the firm's debt-to-equity ratio is 1; the risk-free rate is 3 percent; the beta of the firm's common stock is 1.5; the market risk premium is 9 percent.

1. Using the CAPM paradigm, what is the firm's cost of equity capital?

2. Find the cost of capital if this firm were financed entirely with equity.

Reference no: EM132798340

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