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Isatis Inc. uses 70% equity and 30% debt for all of its financing needs. Shares of the common stock sell at $48. The company expects
Isatis Inc. uses 70% equity and 30% debt for all of its financing needs. Shares of the common stock sell at $48. The company expects to pay $1.35 in dividends next year and increase that amount by 3% annually. The bonds have a 7% coupon rate and a yield-to-maturity of 7.8%. The company has a 32% marginal tax rate. (Show all your work) a) What is the cost of equity? (1 mark) b) What is the cost of debt? (0.5 mark) c) What is the WACC? (1 mark) >
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