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Target % in Capital Structure Component Cost (pre-tax) Component Cost (after-tax) Weighted Component Cost Debt 25.00% Preferred Stock 8.00% Equity 67.00% Tax Rate = 35.00%
| Target % in Capital Structure | Component Cost (pre-tax) | Component Cost (after-tax) | Weighted Component Cost | ||
| Debt | 25.00% | ||||
| Preferred Stock | 8.00% | ||||
| Equity | 67.00% | ||||
| Tax Rate = | 35.00% | WACC = | |||
| Outstanding Bond | Preferred Stock Info | Common Stock Info | |||
| (Annual Coupons) | Preferred Divided | $2.00 | Current Dividend | $2.00 | |
| Time to Maturity (years) | 10 | Current Market Price | $45.00 | Current Price | $42.00 |
| Coupon Rate APR | 6.00% | Preferred Yield | Expected Growth in Dividends | 2.00% | |
| Face Value | $1,000 | Expected Return on Equity | |||
| Current Market Price | $1,240 | ||||
| YTM | |||||
Based on the information in the table, what is the after tax cost of debt?
| 4.44% |
| 2.06% |
| 3.16% |
| 0.51% |
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Advanced Finance Theories
Authors: Ser-Huang Poon
1st Edition
9814460370, 978-9814460378
