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Tanta Co. has 2,000,000 shares outstanding and 200,000 bonds outstanding. Tanta has a beta of 1.2 and a recently paid dividend. The dividend is expected
Tanta Co. has 2,000,000 shares outstanding and 200,000 bonds outstanding. Tanta has a beta of 1.2 and a recently paid dividend. The dividend is expected to grow at 3%, forever. The risk-free rate of return is 3% and the market risk premium is 6%. The current price per share is $85. The bonds have a face value of $1,000 and a current price of $1,100. There are 10 years left to maturity and the coupon rate is 6%, paid annually. The tax rate is 21%. What is the overall required rate of return of Tanta Co.?
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