You have been asked to calculate the cost of capital of CMR Inc. The firm...
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You have been asked to calculate the cost of capital of CMR Inc. The firm has has 2000 zero coupon bonds. Each zero coupon bond has a face value of $1000, will mature 6 years from today, and is currently priced at 70% of the face value. The company has 500,000 common shares outstanding, and each share is currently trading at $15. You have decided to use CAPM to calculate the cost of equity. The risk-free rate is 5%, and market risk premium is 10%. The beta of the company is 2. Also, the company has 200,000 preferred shares. Each share is trading at $10, and the constant yearly preferred dividend per share is $1.5. Finally, the company faces a tax rate of 40%
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