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Following information are taken from Lucky Lukes financial statements as well as the market data. What is the weight of long-term loan in the cost

Following information are taken from Lucky Lukes financial statements as well as the market data. What is the weight of long-term loan in the cost of capital?

Face value of bonds

$50,000

Market value of bonds

$54,500

Coupon rate of bonds

8%

Years to expiry of bonds

5.5

Book value of shares

$100,000

Market value of shares

$150,000

Number of shares

5,000

Expected Net Income

$20,000

Payout Rate

40%

Expected growth rate of earnings

4%

Long-term Loan

$25,000

Tax rate

30%

Interest rate of loan

7%

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