Question
You are given the following information for ABC, Inc. Assume the companys tax rate is 35%. Debt: 40,000 bonds outstanding with 7.5% coupon rate, $1,000
You are given the following information for ABC, Inc. Assume the companys tax rate is 35%. Debt: 40,000 bonds outstanding with 7.5% coupon rate, $1,000 par value, 20 years to maturity, selling for $1050; the bonds make semiannual payments. Common stock: 750,000 shares outstanding, selling for $52 per share; the beta is 0.85. Preferred stock: 1,400,000 shares of 5% preferred stock, currently selling for $25 per share. Market: 7% market risk premium and 3.5% risk-free rate.
Questions:
1. What is the company's after-tax cost of debt?
2. What is the company's cost of common stock?
3. What is the company's cost of preferred stock?
4. What is the company's WACC?
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