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Company E.T. is an Australian company with the following characteristics: - Market value of debt: $150...

Company E.T. is an Australian company with the following characteristics:

  • - Market value of debt: $150 million

  • - Number of shares outstanding: 4 million

  • - Share price: $50

  • - Beta: 1.8

  • - Most recent dividend: $1.5 per share; Dividends are expected to grow at 5% per

year indefinitely.

  • - Weighted average cost of capital (WACC): 6%

  • - Corporate tax rate: 40%

    What is E.T.’s pre-tax cost of debt?

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