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Strolling Corporation is constructing its Cost of Capital schedule. The firm is at its target capital structure. Its 15 year bonds have a 5.5 %
Strolling Corporation is constructing its Cost of Capital schedule. The firm is at its target capital structure. Its 15 year bonds have a 5.5 % coupon rate and sell for $948. Bond coupons are semi-annual. Rolling's stock beta is 1.4, the risk-free rate is 3.0 %, and the market risk premium on the market portfolio is 7.0%. Rolling is a constant growth firm, and just paid a dividend of $1.50. The stock sells for $37.00 and has a growth rate of 5.1%. The firm's tax rate is 30%. The firm's book value balance sheet is as follows: Assets $36,100, Long Term Debt $35,000, Equity ($1.00 par) $3,874, Retained Earnings -$4,274, Comprehensive Income 1,500. To the nearest .1%, what is the weight of debt that should be used used in computing the Weighted Average Cost of Capital? the nearest .1%, what is the pre-tax cost of debt? A To the nearest .1%, what is the cost of retained earnings using the Constant Growth Model? A To the nearest .1%, what is the cost of equity using the Capital Asset Pricing Model? A Using your Capital Asset Pricing Model cost of equity, to the nearest .1%, what is Strolling's Weighted Average Cost of Capital
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