Question
Sears has a target capital structure of 65 % common stock, 10 % preferred stock, and 25 % debt. Its cost of equity is 10%,
Sears has a target capital structure of 65 % common stock, 10 % preferred stock, and 25 % debt. Its cost of equity is 10%, the cost of preferred stock is 4 %, and the pretax cost of debt is 5%. The relevant tax rate is 22%.
What is the WACC?
What is the aftertax cost of debt?
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Fundamental financial accounting concepts
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward
8th edition
978-0078025365
