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how to calculate the cost of debt by not using financial calculator, to solve the equation? Extended Example: ABC Incorp. - Equity Information - 50

how to calculate the cost of debt by not using financial calculator, to solve the equation? image text in transcribed
Extended Example: ABC Incorp. - Equity Information - 50 million shares - \$80 per share - Beta = 1.15 - Market risk premium =9% - Risk-free rate =5% - Preferred Stock Information - 2 million shares - \$55 per share - Fixed dividend =$2.8 - Debt Information - $1 billion in outstanding debt (face value) - Current quote =110 - Coupon rate =9%, semiannual coupons - 15 years to maturity - Tax rate =40% Extended Example: ABC Incorp. What is the cost of equity? - RE= What is the cost of preferred stock? - Rp= What is the cost of debt? - By trial-and-error, spreadsheet, or financial calculator, the semi-annual yield is % - RD= What is the after tax cost of debt? - (1TC)RD=

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