Question
Hello, can you please help me with these 3 problems? Thank you! 1. Munding Corp. has debt with a market value of $23 million and
Hello, can you please help me with these 3 problems? Thank you!
1. Munding Corp. has debt with a market value of $23 million and equity with a market value of $58 million. Its pre-tax cost of debt is 4.5% and its cost of equity is 11%. The firm's marginal tax rate is 21%. What is the company's weighted average cost of capital?
2. Terence Terraforming Inc. has a capital structure of 25% debt and 75% common stock. The expected return on the firm's debt is 4.8% (pre-tax) and the expected return on the firm's equity is 13%. The firm's marginal tax rate is 21%.What is the company's weighted average cost of capital?
3. Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.2% and a yield to maturity of 4.7%.
Simple Corp.'s average tax rate is 18% and its marginal tax rate is 30%. What is the (pre-tax) cost of debt? What is the after-tax cost of debt?
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