Question
A firm is 65% equity and 35% debt. The firms marginal tax rate is 40%. Their bonds trade for $990, mature in nine years, have
A firm is 65% equity and 35% debt. The firms marginal tax rate is 40%. Their bonds trade for $990, mature in nine years, have a par value of $1,000, a coupon rate of 8.00% and pay semiannually. The firms common stock trades for $27 and just paid a dividend of $5.00. Dividends are expected to grow at 3% forever.
37. The firms after tax cost of debt is _____%.
a. 4.895 b. 5.090 c. 5.293 d. 5.491 e. 5.698
38. The firms cost of equity is _____%.
a. 19.632 b. 20.407 c. 21.265 d. 22.074 e. 22.808
39. The firms WACC is ___%.
a. 16.062 b. 16.606 c. 17.251 d. 17.847 e. 18.407
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