Question
Johnson has a target capital structure of 60% common stock, 5% preferred stock and 35% debt. The firms cost of equity is 10%, its cost
Johnson has a target capital structure of 60% common stock, 5% preferred stock and 35% debt. The firms cost of equity is 10%, its cost of preferred is 4% and the pretax cost of debt is 6%. If the tax rate is 34%, what is Johnsons weighted average cost of capital?
Select one:
a. 7.59%
b. 5.55%
c. 8.30%
d. 5.48%
Zahn Enterprises pays $3 million annually to its bondholders and $7.5 million annual to its stockholders. The required rates of return are 9 percent and 15 percent, respectively, by the bondholders and stockholders. What is the value of Zahn Enterprises?
Select one:
a. $83.33 million
b. $1.40 million
c. $10.50 million
d. $16.66 million
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