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Homework answers / question archive / A company has annual net operating cash flow (X) of 1
A company has annual net operating cash flow (X) of 1.5 million dollars in perpetuity and the market value of its capital (V) is 11.8 million dollars. What is the company's cost of capital k o? Provide your answer as a percentage to two decimal places.
Computation of the company's cost of capital:-
Market value of capital = Annual net operating cash flow / Cost of capital
$11.8 = $1.5 / Cost of capital
Cost of capital = $1.5 / $11.8
= 12.71%
