Question
Use the following information for the next five (5) questions (assume tax rate = 35%). IF you could answer all 5 please with work!! especially
Use the following information for the next five (5) questions (assume tax rate = 35%). IF you could answer all 5 please with work!! especially show work for #5
Debt | 50,000 bonds with 7.5 percent coupon rate, $1,000 par value, 20 years to maturity, selling for 96.3 percent of par; the bonds make annual coupon payments. |
Common Stock | 1,000,000 shares of common stock outstanding. The stock sells for a price of $50 per share and has a beta of 1.8. |
Preferred Stock | 150,000 shares of preferred stock outstanding selling for $110 per share with annual dividend payment of $8. |
Market rates | Market return = 10% Risk Free Rate = 4% |
1. The before tax cost of debt is:
a. 7.50%
b. $5,055,750
c. $5,305,167
d. 7.87%
2. The after tax cost of debt is:
a. 4.88%
b. $51.20
c. 5.12%
d. $500
3. The companys cost of common stock is:
a. 14.80%
b. 9.40%
c. $500
d. 28%
4. The companys cost of preferred stock is:
a. $1100 b. 7.27% c. 13.72% d. 7.96%
5. The WACC of the company is:
a. 103%
b. 8.68%
c. 9.65%
d. 11.72%
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