Question
Treadwell has $300 Million (Market Value) 7% semiannual bonds. They are currently trading at a price of $953.07 and have a face value of
Treadwell has $300 Million (Market Value) 7% semiannual bonds. They are currently trading at a price of $953.07 and have a face value of $1000 and will mature in 6 years. The company also has 14 million common stock shares outstanding selling for $50 per share.. The stock has a beta of 1.2, the risk free rate is 4% and the market risk premium is 7%. Treadwell has a marginal tax rate of 32% What is Treadwell's after tax cost of debt? What is Treadwell's after tax cost of common stock?
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