Hello - I need help with the following problem: \"Delta Chemical Corporation is

Question

Hello - I need help with the following problem:

"Delta Chemical Corporation is expected to have the following capital structure for the foreseeable future.

The flotation costs are already included in each cost component. The marginal income tax rate (tm) for Delta is expected to remain at 40% in the future.

PLease provide a detailed answer in Excel and show your used formulas.

thank you!

Hello - I need help with the following problem: Delta Chemical Corporation is expected to have the following capital structure for the foreseeable future. Beta = 1.2 based on the capital asset pricing model. PLease provide a detailed answer in Excel and show your used formulas. thank you! The flotation costs are already included in each cost component. The marginal income tax rate (tm) for Delta is expected to remain at 40% in the future. Determine the cost of capital (k). If the risk free rate is known to be 6% and the average return on S&P; 500 is about 12%, determine the cost of equity with

Explanation / Answer

1.Cost of Capital=10*0.14+20*0.12+55*0.30+15*0.12=22.10%

2.Cost of Equity=Riskfree Rate+Beta*(S&P Rate-Riskfree Rate)=6+1.2*(12-6)=13.2%

3.Cost of Capital=10*0.14+20*0.12+55*0.132+15*0.12=12.86%

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