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Calculate the weighted average cost of capital for Munifs firm with the following financing: Debt: 50,000 bonds, par $1000, 8 percent coupon interest rate in
Calculate the weighted average cost of capital for Munifs firm with the following financing:
Debt: 50,000 bonds, par $1000, 8 percent coupon interest rate in perpetuity (forever)
Preferred stock: 200,000 shares, par $100, 10 percent coupon interest rate (Po=D1/r)
Common equity: $90 million
For this firm the tax rate is 40 percent, the cost of common equity is 12 percent, the before tax rate for debt is 10 percent, and the required return for preferred stock is 10 percent.
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