Question
DEI a leader in radar detection systems is looking to set up a manufacturing plant over seas to produce a new line of RDSs. DEI
DEI a leader in radar detection systems is looking to set up a manufacturing plant over seas to produce a new line of RDSs. DEI will use the following to fund the project. (1) 2,200 5.8% bonds with 25 years to maturity, selling for 103% of par, and makes semiannual payments. (2) 3700 preferred stock, selling for $87 per share, and paying $5 dividend annually. (3) 48,000 shares outstanding, selling for $95 per share; the beta is 1.74. In addition, DEI uses market risk premium of 6.3% and the T-Bill rate of 2.8%. The tax rate is 21%. What is the total value of the firm's capital structure? What is the after-tax cost of debt? What is the cost of preferred stock? What is the cost of equity? What is the WACC?
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