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What is XYZ company's after-tax component cost of debt? XYZ Co. is estimating its WACC. Assume the company's tax rate is 40%. DEBT 6,000 10%
What is XYZ company's after-tax component cost of debt?
XYZ Co. is estimating its WACC. Assume the company's tax rate is 40%. DEBT 6,000 10% coupon bonds outstanding, $1,000 par value, eight years left to maturity, selling for 37% of par; the bonds make semiannual payments. The flotation costs on new debt runs $20 per bond. PREFERREDSTOCK: 50,000 shares of 11% preferred stock outstanding with $100 par value, currently selling for sso per share. Flotation costs are generally 5% of market value. COMMON STOCK: 200,000 shares outstanding selling for $40 per share the last dividend paid was $4.00 and the expected long range rate of growth is 5.5% for the foreseeable future. The firm expects to have net income of $2,500,000 in the coming planning period and customarily pays out 25% as dividends. Flotation cost on new equity usually runs 10% of market value. What is XYZ company's after-tax component cost of debtStep by Step Solution
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