Question
The information for Morgan Co. is as follows: Debt: 5,000 bonds outstanding with 9.4 percent coupon rate, $1,000 par value, 25 years to maturity, selling
The information for Morgan Co. is as follows: Debt: 5,000 bonds outstanding with 9.4 percent coupon rate, $1,000 par value, 25 years to maturity, selling for 109 percent of par; the bonds make annual payments. Common stock: 165,000 shares outstanding, selling for $62 per share; the beta is 1.15. Market: 6.5 percent market risk premium and 5.5 percent risk-free rate Tax: The companys tax rate is 35 percent. A) What is the pretax cost of debt? (5 pts) B) What is the after-tax cost of debt? (5 pts) C) What is the cost of equity? (5 pts) D) What is the companys market value capital structure? (5 pts) E) What is companys WACC? (5 pts)
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