Ganado's Cost of Capital. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.30%, the company's credit risk premium is 3.70%, the domestic beta is estimated at 1.11, the international beta is estimated at 0.86, and the company's capital structure is now 25% debt. The expected rate of return on the market portfolio held by a well-diversified domestic investor is 9.20% and the expected return on a larger globally integrated equity market portfolio is 8.10%. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.50% and the company's effective tax rate is 38%. For both the domestic CAPM and ICAPM, calculate the following:
a. Ganado's cost of equity
b. Ganado's after-tax cost of debt
c. Ganado's weighted average cost of capital
