Question
22 Saustreet, Inc. went public by issuing 1 million shares of common stock AED 25 per share.The shares are currently trading at AED 30 per
22 Saustreet, Inc. went public by issuing 1 million shares of common stock AED 25 per share.The shares are currently trading at AED 30 per share Current risk free rate is 496, market risk premium is 8% and the company has a beta coefficient of 1.2 During last year, it issued 50,000 bonds of AED 1,000 par paying 10%s coupon annually maturing in 20 years. Bond Yield is 10.6%. The bonds are currently trading at AED 950. The tax rate is 30%. Answer the following questions: (10 marks). a. What is Firm X's after-tax cost of debt to nearest one decimal? (2 marks) b. What is Finn X's cost of equity? to nearest one decimal? (2 marks) c. What is Firm X's weight of debt? to nearest one decimal? (2 marks) d. What is the weight of equity? to.nearest one decimal? (2 marks) e. What is Firm X's Weighted Cost of Capital (WACC)? to nearest two decimab (2 marks) WACC [We x Ke"] Wd x [Kdx (1-T) (We-E/V and Wd=D/V) *(Ke-[rf Beta (rm -rf)]) c Show all workings to get full marks
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