What would be the before-tax cost of debt (rd) for a company that currently has 10-year, 12% annual coupon bonds outstanding? The bonds are currently selling in the market for $1,200 and have a $1,000 par value.
For the same company in question #1, what is the company’s after-tax cost of debt
[rd(1-T)]? The company recently reported that its EBT was $10,000,000 and its Net Income was $6,750,000.
If the company was planning to raise capital for a project that lasts ten years, what would be its cost of equity (rs) given the following information? The current on a 10-year Treasury Note is 4.5%, the historical return on the S&P 500 is 12%, and the company’s current beta (β) is 1.1.
Given the information found in questions 2 and 3; what would the company’s weighted average cost of capital be if the company had a Debt-to-Total Asset Ratio of 0.35, and no Preferred Stock has been issued?
Using the information found in questions 2 & 3, what would the company’s WACC be if 30% of their financing came from debt, 50% come from common equity, and the remainder come from preferred stock? The preferred stock has an $8 dividend and a market price of 95 dollars.