Question
Eastern Music has 20,000 shares of common stock outstanding at a price per share of $30. The firm also has 5,000 share of 5 percent
Eastern Music has 20,000 shares of common stock outstanding at a price per share of $30.
The firm also has 5,000 share of 5 percent preferred stock outstanding at a price per share of $60. The preferred stock has a stated value of $100.
The company has a bond outstanding that sells for $102 and matures in 5 years. The total face value of the bond is $300,000. The bond pays semi-annual coupons and has a coupon rate of 4%.
The company has a beta of 1.66. The ten-year US treasury bond yield is 3%. The market risk premium is 5%.
What is the company's after-tax cost of debt, if the company's tax rate is 25%?
What is the company's cost of preferred stock?
.What is the debt-to-capital ratio? Assuming that preferred stock is not considered as debt.
What is the company's WACC?
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