Question

Use the following data for the next 5 questions:

Debt	46,000 bonds with a 5.0% coupon rate, payable annually, 15 years to maturity, selling at $1,050 per bond.
Common Stock	762,000 shares of common stock outstanding. The stock sells for a price of $56 per share and has a beta of 1.15.
Preferred Stock	294,000 preferred shares outstanding, currently trading at $102.68 per share; with an annual dividend payment of $6.80,
Market	The market risk premium is 20% and the risk free rate is 6%
Tax Rate	25%

What is the before tax cost of debt (R_d)? (Answer as a percentage and round to 2 decimals)

Select one:

a. 3.44 %

b. 4.53 %

c. 6.37 %

d. 7.36 %

e. 1.45 %

What is the after tax cost of debt (R_d)? (Answer as a percentage and round to 2 decimals)

Select one:

a. 5.24 %

b. 2.31 %

c. 6.23 %

d. 3.40 %

e. 0.32 %

What is the cost of preferred stock (R_p)? (Answer as a percentage and round to 2 decimals)

Select one:

a. 3.54 %

b. 8.46 %

c. 9.45 %

d. 5.53 %

e. 6.62 %

What is the cost of common stock (R_E)? (Answer as a percentage and round to 2 decimals)

Select one:

a. 27.91 %

b. 25.92 %

c. 31.83 %

d. 29.00 %

e. 30.84 %

What is the weighted average cost of capital? (Answer as a percentage and round to 2 decimals)

Select one:

a. 12.13 %

b. 10.14 %

c. 13.22 %

d. 15.06 %

e. 16.05 %

Answer 1