Question
ABC Corporation can issue new debt with a coupon rate of 10% and has a marginal tax rate of 35%. The firms common stock currently
ABC Corporation can issue new debt with a coupon rate of 10% and has a marginal tax rate of 35%. The firms common stock currently sells for $30 a share and has a growth rate of 5%. The next dividend is expected to be $3.00. The firms preferred stock is currently selling for $55 with a dividend of $6 a share. The firms target capital structure is 30% debt, 10% preferred stock, and the remainder common equity. What is the firms after-tax cost of debt? What is the firms cost of common equity? What is the firms cost of preferred stock? What is the firms WACC?
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