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ABC Inc. has a 6% semiannual bond issue outstanding with 15 years to maturity. The bond currently sells for 95% of its face value. Suppose

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ABC Inc. has a 6% semiannual bond issue outstanding with 15 years to maturity. The bond currently sells for 95% of its face value. Suppose the book value of the debt issue is $70 million. In addition, the company has a second debt issue on the market, a zero-coupon bond with 7 years left to maturity; the book value of this issue is $20 million and the bonds sell for 60% of par. Assume the par value of the bond is $1,000. Also suppose the risk-free rate is 3% and the market portfolio has an expected return of 9%. The market portfolio has a variance of 0.06. ABC stock has a covariance of 0.3 with the market portfolio If the company has a target capital structure of debt-equity ratio of 0.60, and tax rate is 35%, calculate the below: a) The company's after-tax cost of debt b) The company's cost of equity c) The company's overall cost of capital

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