Question
Compute the cost of capital for the firm for the following: a.A bond that has a $1,000 par value (face value) and a contract or
Compute the cost of capital for the firm for the following:
a.A bond that has a
$1,000
par value (face value) and a contract or coupon interest rate of
11.4
percent. Interest payments are
$57.00
and are paid semiannually. The bonds have a current market value of
$1,121
and will mature in
10
years. The firm's marginal tax rate is
34
percet.b.A new common stock issue that paid a
$1.83
dividend last year. The firm's dividends are expected to continue to grow at
7.6
percent per year, forever. The price of the firm's common stock is now
$27.09.
c.A preferred stock that sells for
$142,
pays a dividend of
9.7
percent, and has a $100 par value.d.A bond selling to yield
12.4
percent where the firm's tax rate is
34
percent.
Question content area bottom
Part 1
a.The after-tax cost of debt is
enter your response here%.
(Round to two decimal places.)
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