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You firm has issued 10,000 bonds with a market price of $108 per bond. The firm also has 30,000 common shares outstanding at a price
You firm has issued 10,000 bonds with a market price of $108 per bond. The firm also has 30,000 common shares outstanding at a price of $36 per share. If the common shares will pay a dividend of $1.50 at the end of the year and thereafter dividends will grow at a rate of 3 percent. IF the after-tax yield on the forms bond is 6%, what is the firms weighted average cost of capital?
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