Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required: 1. Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate

image text in transcribed
image text in transcribed
image text in transcribed
Required: 1. Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 9%. Today, the bond is selling at 110 (i.e,, 110% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par value of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the after-tax cost of the preferred stock? 3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market return on the firm's common equity is 20\%. What is Micro Advantage's weighted-average cost of capital (WACC)? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common stock a par value of $10 per share and a current market price of $170 per share. The expected after-tax market return on the firm's commor is Micro Advantage's weighted-average cost of capital (WACC)? (Round "After-tax Rate or Expected Return" and "Cost of Capital Compo places (i.e. 1234=12.34% ), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.) Complete this question by entering your answers in the tabs below. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par value of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the after-tax cost of the preferred stock

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Concepts For A Changing Environment With IDEA Software

Authors: Larry E. Rittenberg, Bradley J. Schwieger

4th Edition

0387321500, 978-0324180237

More Books

Students also viewed these Accounting questions