Question
Use the information below to answer the next 6 questions Jack's Construction Co. has 70 bonds outstanding that are selling at their par value of
Use the information below to answer the next 6 questions Jack's Construction Co. has 70 bonds outstanding that are selling at their par value of $1,000 each. Bonds with similar characteristics are yielding a pretax 8.2 percent return. The firm also has 4,500 shares of common stock outstanding. The stock has a beta of 1.3 and sells for $50 a share. The U.S. T-bill is yielding 4 percent, the market risk premium is 11 percent, and the firm's tax rate is 26 percent. Assuming its earnings are sufficient to classify all interest as a tax deductible,
1.)What is the pre-tax cost of debt? (Rounded to two decimal place)
2.)What is the weighting for debt? (Rounded to two decimal place)
3.).What is the after-tax cost of debt? (Rounded to two decimal place)
4.).What is the cost of equity?(Rounded to two decimal place)
5.).What is the weighting for equity?(Rounded to two decimal place)
6.).What is the WACC?(Rounded to two decimal place)
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