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Cost of Capital - Aurora's Princess Jewelry 1. What is the after-tax cost of equity funding?...

Cost of Capital - Aurora's Princess Jewelry

1. What is the after-tax cost of equity funding?

2. What is the after-tax cost of long-term debt?

3. What is the book value weights?

4. What is the marginal or market value weights?

5. What is the after-tax WACC at book value?

6. What is the after-tax WACC at market value?

Equity Information

50 million shares

Issued with $40 Par value

Sold at $40 per share, no excess

Market Price: $80 per share

D0 = $5.15

Growth Rate = 5.0%

Flotation Cost = 9.0%

Retained Earnings = $1 billion

Debt Information

$1 billion in outstanding debt

$1,000 face value per bond

Current quote = 110

Coupon rate = 9%, semiannual coupons

15 years to maturity

Flotation Cost = 2%

Tax rate = 21%

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