Question
Use the following information to answer the next five questions (assume Co. tax rate of 35%): Debt - 50,000 bonds with 7.5 percent coupon rate,
Use the following information to answer the next five questions (assume Co. tax rate of 35%):
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 1.08
Preferred Stock - 150,000 shares of preferred stock outstanding, currently selling for $110 per share; with annual dividend payment of $8.00
Market - 10 percent market risk premium and 4 percent risk free rate
30) The before tax cost of debt is:
a) 7.50%
b) $5,055,750
c) $5,305,167
d) 7.87%
31) The after tax cost of debt is:
a) 4.88%
b) $51.20
c) 5.12%
d) $50.00
32) The companys cost of common stock is:
a) 14.80%
b) 9.40%
c) $50.00
d) 2.08%
33) The companys cost of preferred stock is:
a) $110.00
b) 7.27%
c) 13.72%
d) 7.96%
34) The WACC of the company is:
a) 10.03%
b) 8.68%
c) 9.65%
d) 11.72%
Please show work....
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