Question
Required rate of return (i.e., profit) on the firm's debts (i.e., bonds) (Y) is 2.4% = = 0.024 Required rate of return (i.e., profit) by
Required rate of return (i.e., profit) on the firm's debts (i.e., bonds) (Y) is 2.4%
=
= 0.024
Required rate of return (i.e., profit) by the firm's common stockholders (kcs) is 7.2%
=
= 0.072
Corporation is facing corporate tax rate of 40.1%
After-tax cost of debt (kd) = 0.024 (1 - 0.401)
After-tax cost of debt (kd) = 0.024 - 0.009624
After-tax cost of debt (kd) = 0.014376
Rounding to the nearest thousandths is 0.014
After-tax cost of debt (kd) = 0.014
Or, after-tax cost of financing for debt (kd) is 0.014
What do I do to get or compute the after-tax cost of equity?
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