Question
The Holmes Company's currently outstanding bonds have an 8% coupon and a 12% yield to maturity. Holmes believes it could issue new bonds at par
- The Holmes Company's currently outstanding bonds have an 8% coupon and a 12% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places.
2.Torch Industries can issue perpetual preferred stock at a price of $53.00 a share. The stock would pay a constant annual dividend of $7.00 a share. What is the company's cost of preferred stock, rp? Round your answer to two decimal places.
3.Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 9%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 12.10%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.
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