Cottontail Shop has $30,000 in Debt, which mainly consists of 10-year bonds with 8% coupon, $1,000 par value, priced at $ 950. Tax rate is 21%. They also have $70,000 in common stocks. They just paid $3 dividend, growth rate of 4%, current price is $32.
1) What is their after-tax cost of debt?
How much is their cost of capital (WACC)?
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