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The Holmes Company's currently outstanding bonds have an 8% coupon and a 13% 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 13% 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 25%, what is Holmes' after-tax cost of debt?
- (C10) The Holmes Company's currently outstanding bonds have an 5% coupon and a 10% 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 30%, what is Holmes' after-tax cost of debt?
- (C10) 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 11%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.80%. What is Pearson's cost of common equity?
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