Question
(Weighted average cost of capital) Crypton Electronics has a capital structure consisting of 44 percent common stock and 56 percent debt. A debt issue of
(Weighted average cost of capital)Crypton Electronics has a capital structure consisting of 44 percent common stock and 56 percent debt. A debt issue of $1000 par value,5.7 percent bonds that mature in 5 years and pay annual interest will sell for $975 Common stock of the firm is currently selling for $30.78 per share and the firm expects to pay a $2.34 dividend next year. Dividends have grown at the rate of 5.1 percent per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is 30 percent?
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