Question
1.....A firm is paying a 4% coupon interest rate for its outstanding bonds. All else constant, the higher the firm's tax rate: Select one: A.
1.....A firm is paying a 4% coupon interest rate for its outstanding bonds. All else constant, the higher the firm's tax rate: Select one: A. The higher its after-tax cost of debt B. The lower its after-tax cost of debt C. The after-tax cost of debt remains unchanged D. The answer cannot be determined with the information provided
2......Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost of capital for stone corp. given the following information:
Bond coupon rate 14%
Bond yield 10%
Dividend expected $5
Price common $100
Growth rate 8%
Corporate tax rate 30%
Select one:
A. 9.50%
B. 10.00%
C. 11.50%
D. 12.00%.
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