If TJ Enterprises' stock price were to rise such that t sold at 1.5 times its book value, causing the cost of equity to fall to 13 percent what would be the firm's cost of capital (assuming the cost of debt and tax rate do not change).

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6. Look at the information below. This table refers to TJ Enterprises. Currently common stock is being sold at for a price equal to its book value and the firm's bonds are selling at par. John managers estimate that the market requires a 15 percent return on its common stock, the firm's command a yield to maturity of 8 percent, and the firm faces a tax rate at 34 percent $54,000 Cash Accounts Receivable 458,000 $1,259,000 Inventories 740,000 Long-term Debt Net Property, Plant & Equipment Common Equity 1,895,500 1,888,500 $3,147,500 $3,147,500 Total Assets Cost of debt financing 8% Cost of equity 15% 34% Tax rate Market to book ratio 1 Market Value/ After-tax Cost Component Proportion Product Balance Sheet Long-term Debt Common Equity 6. Look at the information below. This table refers to TJ Enterprises. Currently common stock is being sold at for a price equal to its book value and the firm's bonds are selling at par. John managers estimate that the market requires a 15 percent return on its common stock, the firm's command a yield to maturity of 8 percent, and the firm faces a tax rate at 34 percent $54,000 Cash Accounts Receivable 458,000 $1,259,000 Inventories 740,000 Long-term Debt Net Property, Plant & Equipment Common Equity 1,895,500 1,888,500 $3,147,500 $3,147,500 Total Assets Cost of debt financing 8% Cost of equity 15% 34% Tax rate Market to book ratio 1 Market Value/ After-tax Cost Component Proportion Product Balance Sheet Long-term Debt Common Equity