Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long-term capital. Continue with the values and assumptions outlined
You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long-term capital. Continue with the values and assumptions outlined above. The company's marginal tax rate is 25%. First, there are 207,500 shares of common stock, which are currently selling for $41.93. Recently, the firm announced EPS of $3.87. You feel that it is reasonable to assume that earnings will grow at 1.35% into the future. Second, there is an issue of 4,500 coupon bonds with a face value of $1,000, which pays 5,10% (annual) coupons, and mature in eleven years. These bonds are currently trading for $948.07. Fourth, what is the firm's weighted-average-cost-of-capital? 8.60% 8.23% 7.18% 6.B0%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started