Question
Company X has provided the following information about its current capital structure: Debt: The firm just issued an 8-year, $1,000 par value, 6 percent (paid
Company X has provided the following information about its current capital structure:
Debt: The firm just issued an 8-year, $1,000 par value, 6 percent (paid semi-annual) coupon bond. The current mark price of the bond is $985, and there are 1,000 bonds outstanding. The firm has a marginal tax rate of 36 percent.
Common Stock: A firm's common stock is currently selling for $92 per share, and there are 7,138 shares oustanding. The most recent dividend paid was $9. Dividends are expected to grow at a constant 5% rate indefinitely.
Given the information above, calculate the following (show work):
a. Calculate the firm's after-tax cost of debt
b. Calculate the cost of existing common sock
c. Calculate the firm's WACC
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