Question
The company has 100,000 bonds with an 11% coupon rate, payable semiannually, 23 years to maturity, selling at $1,201 per bond. The company also has
The company has 100,000 bonds with an 11% coupon rate, payable semiannually, 23 years to maturity, selling at $1,201 per bond.
The company also has 1,500,000 shares of common stock outstanding. The stock sells for a price of $73 per share and has a beta of 1.5.
Additionally, the company has 200,000 preferred shares outstanding, currently trading at $175 per share; with an annual dividend payment of $2.17.
The market risk premium is 7% and the risk free rate is 3.1%.
The tax rate is 21%.
What is the before-tax cost of debt?
What is the after-tax cost of debt?
What is the cost of preferred stock?
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Financial Management Principles And Practices
Authors: Sudhindra Bhat
2nd Edition
8174465863, 978-8174465863
