Part 1. Cost of Debt - Micro Spinoffs Inc., issued 20 year debt a year ago at coupon rate at 8 percent annually. Today the debt is selly at $1050.
If the firms tax bracket is 35%, what is the afer-tax cost of the debt?
Part 2. Cost of Preferred Stock - Micro Spinoffs also has preferred stock that is outstanding. The stock pays a divident of $4 per share, the stock sells for $40.
What is the cost of the preferred stock?
Part 3. Cost of Equity - Reliable Electricity is a regulated public utility, and is expected to provide steady growth of dividents of 5 percent per year for the indefinite future. It's last dividend was $5 a share; the stock sold for $60 a share just after the divident was paid.
What is the company's cost of equity?
Part 4. Calculating WACC - Reactive Industries has the following capital structure. Its coporate tax is 35 percent.
What is its WACC?