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8 years ago, your company issued $10M worth of 10-year semiannual bonds that pay a 10% coupon rate. The bond is currently selling for $1,030
8 years ago, your company issued $10M worth of 10-year semiannual bonds that pay a 10% coupon rate. The bond is currently selling for $1,030 per $1,000 bond. The issuance cost was 2%. Today, your firm borrows $8M in secured debt at 6% interest and $12M in unsecured debt at 8%. In addition, the firm pays a $5 preferred stock dividend. The preferred stock is currently trading at $45 with 1M shares outstanding. The firm has a beta of 1.50, the 10-year T-bond rate is 3%, and the market risk premium is 6%. The price of the common stock is currently $72 with 1.5M shares outstanding. The tax rate is 30%. A) What is the EAY of the bonds after issuance costs? (0.50 points) B) What is the after-tax cost of debt? C) What is the cost of preferred equity? D) What is the cost of common equity? E) What is the firms WACC
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