Question
CGT Co.s stock is currently selling for $15.25 per share, and they have 10,000,000 shares outstanding. They have $40,000,000 book value of 20-year, 9% coupon
CGT Co.’s stock is currently selling for $15.25 per share, and they have 10,000,000 shares outstanding. They have $40,000,000 book value of 20-year, 9% coupon semiannual bonds outstanding (40,000 bonds at $1,000 par value). Each bond is selling for $930.41. The firm’s beta is 1.22, and the risk-free rate is 3.5%. Further, the required return on the market is 11.5%, and the firm’s tax rate is 25%
What is the after-tax cost of debt?
What is the firm’s cost of equity, based on the CAPM?
Find the firm’s weights of debt and equity, and find the resulting WACC.
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The aftertax cost of debt 9 x 1 025 675 The firms cost of equity based ...Get Instant Access to Expert-Tailored Solutions
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