Nozama Online Limited has 10 million shares of common stock outstanding. The current share price is $40 per share. The dividend one year from today is expected to be $4 and the growth rate is -2%. 

Nozama also has a bond issue outstanding, which is maturing in 10 years, has a face value of $200 million, 6% coupon payable annually, and sells for 107.7217% of the face value. 

Nozama also has 2,000,000 preferred shares outstanding, which are currently selling for $80 per share and pay a dividend of $4.48 per year. 

The corporate tax rate is 40%. Determine the weighted average cost of capital? 

 

WeLoveDebt Inc. has a target debt/equity ratio of 3, weighted average cost of capital of 9% and the corporate tax rate of 40%. 

 1. If cost of equity is 16% then what is the pretax cost of debt? 

 2. If instead you know before tax cost of debt is 12%, what is the cost of equity?  

 3. What is the unlevered cost of equity?