Inputs

Equity
Unlevered beta for business = 1.02
Do you want to add a "private company premium"(P) or use a "total beta"(T)? T
If private company premium, enter the premium(in %) here 10%
If total beta, enter correlation with market = 45%
Riskfree Rate = 6%
Risk Premium = 5.50%

Debt
Do you want to estimate a synthetic cost of debt? N
Pre-tax Cost of Debt = 7%
Tax Rate = 40%

Debt Ratio
Do you want to use the industry average debt to capital ratio? Y
If yes, enter the industry average market debt to capital ratio = 15%
If not, enter the target debt ratio for the private firm =

Output
Debt to capital ratio for private firm = 15.00%
Total beta for firm = 2.51

Equity Debt
Weight in Cost of Capital 85.00% 15.00%
Cost of Component 19.79% 4.20%
Capital
100.00%
17.45%
Inputs for synthetic rating estimation
Please read the special cases worksheet (see below) before you use this spreadsheet.
Enter current Earnings before interest and taxes (EBIT) = 10000 (Add back only long term interest expense fo
Enter current interest expenses = 2500 (Use only long term interest expense for fina
Enter current long term government bond rate = 6.00%
Output
Interest coverage ratio = 4.00
Estimated Bond Rating = BBB
Estimated Default Spread = 2.25%
Estimated Cost of Debt = 8.25%

Ratings table
If interest coverage ratio is
greater than ≤ to Rating is Spread is
-100000 0.5 D 14.00%
0.5 0.8 C 12.70%
0.8 1.25 CC 11.50%
1.25 1.5 CCC 10.00%
1.5 2 B- 8.00%
2 2.5 B 6.50%
2.5 3 B+ 4.75%
3 3.5 BB 3.50%
3.5 4.5 BBB 2.25%
4.5 6 A- 2.00%
6 7.5 A 1.80%
7.5 9.5 A+ 1.50%
9.5 12.5 AA 1.00%
12.5 100000 AAA 0.75%
e this spreadsheet.
Add back only long term interest expense for financial firms)
Use only long term interest expense for financial firms)