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(Solved): Irish Produce is an Irish producer of food products. Over the past year, profitability has been str ...




Irish Produce is an Irish producer of food products. Over the past year, profitability has been strong, and the share price h
Irish Produce is an Irish producer of food products. Over the past year, profitability has been strong, and the share price has risen from \( € 55 \) per share to \( € 80 \) per share. Financial analysts (who generate projections in euros) expect the profit growth to continue. The company has 200 million shares outstanding. Its borrowing is conservative; the company has only \( € 8,000 \) million in debt. The debt trades at a yield to maturity 50 basis points above Irish risk-free bonds. Irish Produce has a market beta of \( 0.7 \). If the Irish risk-free rate is \( 7 \% \), the market risk premium is \( 5 \% \), and the marginal tax rate is \( 30 \% \), what is the cost of capital of Irish Produce? (Assume that the current capital structure is the target capital structure going forward.) (10 marks)


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Answer: - Market Value of Equity =Number of Share
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