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You are given the following information for DEF Co. Assume the company's tax rate is 35%. Debt: 2,500 8 percent annual coupon bonds outstanding, $1000
You are given the following information for DEF Co. Assume the company's tax rate is 35%. Debt: 2,500 8 percent annual coupon bonds outstanding, $1000 par value, 25 years to maturity, selling for 98 percent of par. Common Stock: 95,000 shares outstanding selling for $65 per share, the beta is 1.15. Preferred Stock: 10,000 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. Market: 8 percent market risk premium and 3.2 percent risk-free rate a. What is the firm's capital structure? (i.e. find the weights) b. What is the cost of debt? c. What is the firm's cost of equity? d. What is the firm's cost of preferred stock? e. What is firm's WACC? (1 mark)
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