Calculate the capitalization rate (discount rate) for equity for the following three firms, D, E and F:
|
Capital |
Firm D |
Firm E |
Firm F |
|
Debt |
$1,500 |
$1,000 |
$2,000 |
|
Equity |
$1,500 |
$2,000 |
$1,000 |
Assume that there are no corporate income taxes and that the cost of equity for an unlevered firm is 10% and the cost of risk-free debt is 6%