Question

If Qual Corp. currently trades at $35/ per share, with 2 million shares outstanding. Their total debt is 35 million with 15- year maturity, semi-annual bond pricing at $780 now with $1000 par value. The coupon rate is 7%. This company has a Beta of 1.3, risk free rate is 3% and SP 500 index return is 10% now. With a tax rate 40%, please calculate the WACC.

1(a) How much is cost of debt before tax? ( In decimal format)

1(b) how much is cost of equity?(same format)

1(c) What is WACC? (same format)

Answer #1

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currently trading for $35 per share.
The most recent dividend paid was $4 per share.
Dividends are expected to increase by 2% per year for the
foreseeable future.
There are 25,000 bonds outstanding with a coupon rate of 5% that
mature in eight years. The face value of these bonds is $1000,
coupon payments are made annually, and the yield to maturity is
4%.
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