The company has 100,000 bonds with an 12% coupon rate, payable semiannually, 20 years to maturity,...
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The company has 100,000 bonds with an 12% coupon rate, payable semiannually, 20 years to maturity, selling at $1,125 per bond. The company also has 1,500,000 shares of common stock outstanding. The stock sells for a price of $65 per share and has a beta of 1.5. Additionally, the company has 200,000 preferred shares outstanding, currently trading at $115 per share; with an annual dividend payment of $8.75. The market risk premium is 8% and the risk free rate is 2.5%. The tax rate is 21%. What is the before-tax cost of debt? The company has 100,000 bonds with an 12% coupon rate, payable semiannually, 20 years to maturity, selling at $1,125 per bond. The company also has 1,500,000 shares of common stock outstanding. The stock sells for a price of $65 per share and has a beta of 1.5. Additionally, the company has 200,000 preferred shares outstanding, currently trading at $115 per share; with an annual dividend payment of $8.75. The market risk premium is 8% and the risk free rate is 2.5%. The tax rate is 21%. What is the before-tax cost of debt?
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To calculate the beforetax cost of debt we need to determine the yield ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
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