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How to calculate cost of equity and market value of a firm?
The solution is as follows −
|Debt ratio||Equity||Debt||Cost of debt||WACC||Interest Expenses (I)||Market value of a company (V)||Market value of Equity (E)||Net operating income (EBIT – I)||Cost of equity (Ke)|
Equity = book value * (1-debt ratio)
Debt = book value * debt ratio
Interest (I) = debt * cost of borrowed
Market value of a company (V) = EBIT/WACC
Market value of equity (E) = V – I
Cost of equity = E/V
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