Problem
Use the following information about Rex Inc. for problems.
Common stock: 500,000 shares outstanding. $20 per share, beta=2.3
Bonds: 3,000 bonds outstanding, $1,000 face value each, 4.5% coupon paid semiannually, 9 years to maturity, market price of $1,015 per bond.
Market risk premium=8%, yield on 30 day Treasury Bill= 1.5%, Tax rate = 25%
a) What is Rex Inc's Weight of Debt?
b) What is Rex Inc's Weight of Equity?
c) What is Rex Inc's Before Tax Cost of Debt?
d) What is Rex Inc's After Tax Cost of Debt?
e) What is Rex Inc's Cost of Equity?
f) What is Rex Inc's WACC?