A firm's new bonds will have a 12% coupon. The current price of common shares is $40.00; the most recent dividend was $2.00. The firm's tax rate is 35%. The firm is expected to grow at 9% for the foreseeable future. What is their cost of equity (retained earnings)? Remember that D0 is not the same as D1.
Select one:
A. 14.00%
B. 14.45%
C. 9.00%
D. 5.45%
A company has an after tax cost of debt of 7% and a 17% cost of equity. From the capital section of their balance sheet below, calculate their weighted average cost of capital.
LT Debt 4500
Equity 7500
Select one:
A. 10.0%
B. 10.8%
C. 13.3%
D. 24.0%