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The price of the 6% 20 year bonds of WP is $1100. It has issued 500 bonds to investors, and 10,000 common shares. We know
- The price of the 6% 20 year bonds of WP is $1100. It has issued 500 bonds to investors, and 10,000 common shares. We know that the 10 year bond rate is .03, the return in the market has been 11 %, and the fluctuation in the price of WP is 20% less than the stock market. If the growth rate of the profit and the dividends of WP is 4%, while the tax rate is 30% and WP pays $5 dividends per share. Derive the cost of capital of WP.
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