Question
Layar Gemilang has collected the following information to estimate the company's weighted average cost of capital (WACC). Assume the company's tax rate is 35 percent.
Layar Gemilang has collected the following information to estimate the company's
weighted average cost of capital (WACC). Assume the company's tax rate is 35 percent.
Debt
4,000 7 percent coupon bonds outstanding, RM1,000 par value, 20 years to maturity,
selling for 105 percent of par; the bonds make semiannual payments.
Common stock
90,000 shares outstanding, selling for RM60 per share; the beta is 1.10.
Preferred Stock
13,000 shares of 6 percent preferred stock outstanding currently selling for RM110
per share.
Market
14 percent expected return and T Bill yielding 6 percent.
i. What is the company's after-tax cost of debt?
ii. What is the company's cost of common equity?
iii. What is the company's cost of preferred stock?
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