A corporation has 9,000 bonds outstanding with a 6% coupon payable annually, 8 years to
maturity, a $1,000 face value, and a $1,100 market price.
The company’s 450,000 shares of common stock sell for $25 per share and have a beta of 1.5.
The risk free rate is 4%, and the market return is 12%.
Assuming a 40% tax rate, what is the company’s cost of equity? What is the company’s after-tax
cost of debt? What is the company’s WACC?
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Get Answers For Free
Most questions answered within 1 hours.