Question
I cannot figure out the AFTER TAX COST OF DEBT I thought it was 5.10% but that was wrong. Please help Hankins Corporation has 9.3
I cannot figure out the AFTER TAX COST OF DEBT I thought it was 5.10% but that was wrong. Please help
Hankins Corporation has 9.3 million shares of common stock outstanding, 680,000 shares of 7.3 percent preferred stock outstanding, and 193,000 of 8.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $65.80 per share and has a beta of 1.38, the preferred stock has a par value of $100 and currently sells for $106.20 per share, and the bonds have 14 years to maturity and sell for 87 percent of par. The market risk premium is 6.95 percent, T-bills are yielding 5.65 percent, and the firms tax rate is 40 percent. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
Market value weight of debt .1971 | |
Market value weight of preferred stock .0848 | |
Market value weight of equity .7181 | |
What is the firm's cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Aftertax cost of debt | % |
Cost of preferred stock 7.29 | % |
Cost of equity 15.24 | % |
If the firm is evaluating a new investment project that has the same risk as the firms typical project, what rate should the firm use to discount the projects cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Weighted average cost of capital 12.69 %
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