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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 3.5% coupon
Strolling Corporation is constructing its Cost of Capital schedule. The firm is at its target capital structure. Its 15 year bonds have a 3.5% coupon rate and sell for \$944. Bond coupons are semi-annual. Rolling's stock beta is 1.3, the risk-free rate is 3.0%, and the return on the market portfolio is 7.0%. Rolling is a constant growth firm, and will pay a dividend of $1.50 at the end of next year. The stock sells for $45.00 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 $37,100, Long Term Debt $36,000, 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? A. To 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 Constant Growth Model? A Using your Constant Growth Model cost of equity, to the nearest .1\%, what is Strolling's Weighted Average Cost of Capital? A
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