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Q1) Jack's Construction Co. has 80,000 bonds outstanding that are selling at their par value of $1,000 each. The bonds have a coupon rate and
Q1) Jack's Construction Co. has 80,000 bonds outstanding that are selling at their par value of $1,000 each. The bonds have a coupon rate and YTM of 8.6 percent. The firm also has 4,000,000 shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. T-bill is yielding 4 percent, the market risk premium is 8 percent, and the firm's tax rate is 21 percent.
(a) What is the firms cost of equity?
(b) What is the firms after-tax cost of debt?
(c) What is the firm's weighted average cost of capital?
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