BearKat Enterprises

Suppose BearKat Enterprises wants to raise capital to build a factory to build chips in the U$.$S$.$ The CEO asks you to calculate their weighted average cost of capital. She gives you these facts.

Tax rate $=23\mathrm{.}4\%.$

$15-$year, $7\mathrm{.}5\%$ coupon, semiannual payment non$-$callable bonds sell for $$1,010.$ Three year $6\mathrm{.}0\%$ coupon bonds sell for $$1025.$ New bonds will be privately placed with no flotation cost.

$12\mathrm{.}75\%,$ $$100$ par value, quarterly dividend, perpetual preferred stock sells for $$185\mathrm{.}50.$

Common stock sells for $$123\mathrm{.}45.$ They pay a dividend of $$2\mathrm{.}12$ and it has a growth rate of $4\mathrm{.}82\%.$

BearKat enterprises stock has a Beta of $\mathrm{.}81.$ The risk free rate is $3\mathrm{.}5\%$ and the market risk premium is $6\mathrm{.}12\%.$ Management believes their stock has a risk premium over their bonds of $1\mathrm{.}5\%.$

They currently obtain $40\%$ of their capital from bonds, $20\%$ from preferred stock and the rest from common equity. However, their target capital structure is $45\%$ debt, $15\%$ preferred stock and the remainder from common equity. what is the full year after tax cost of debt? A$.2\mathrm{.}30\%$ b$\mathrm{.}3\mathrm{.}14\%$ c$.3\mathrm{.}68\%$ d$.5\mathrm{.}66\%$ what is their cost of common equity using the CAPM method? a$.5\mathrm{.}05\%$ b$.7\mathrm{.}02\%$ c$.8\mathrm{.}46\%$ d$.9\mathrm{.}01\%$ what is the cost of their preferred stock? A$.12\mathrm{.}16\%$ b$.8\mathrm{.}81\%$ c$.6\mathrm{.}87\%$ d$.4\mathrm{.}14\%$ what is their cost of common equity using the DCF method? A$.5\mathrm{.}70\%$ b$.6\mathrm{.}62\%$ c$.6\mathrm{.}83\%$ d$.8\mathrm{.}17\%$ what is their cost of common equity using the bond$-$yield $-$ plus$-$ risk premium method? A$.7\mathrm{.}16\%$ b$.8\mathrm{.}89\%$ c$.9\mathrm{.}22\%$ d$.10\mathrm{.}11\%$