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Masterson, Inc., has 3.9 million shares of common stock outstanding. The current share price is $87.00, and the book value per share is $10.00. The
Masterson, Inc., has 3.9 million shares of common stock outstanding. The current share price is $87.00, and the book value per share is $10.00. The company also has two bond issues outstanding. The first bond issue has a face value of $76 million, a coupon rate of 5.6 percent, and sells for 96 percent of par. The second issue has a face value of $48 million, a coupon rate of 6.2 percent, and sells for 105.5 percent of par. The first issue matures in 26 years, the second in 9 years. The most recent dividend was $4.13 and the dividend growth rate is 4.6 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent. | ||
What is the companys cost of equity? What is the companys aftertax cost of debt?
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