Question

Cottontail Shop has $30,000 in Debt, which mainly consists of 10-year bonds with 8% coupon, $1,000...

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)?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cream and creamsin has a capital of 40% debt and 60% equity. Tax rate is 32%,...
Cream and creamsin has a capital of 40% debt and 60% equity. Tax rate is 32%, bonds trade for 784. Face value is 1,000 coupon rate is 8%, paid semiannual with 7 years to maturity. Common stocks are $15 per share, dividend just paid is 2% and will grow st 6% per year. What is the WACC?
Your company’s bonds are priced at $978 per $1,000 of par value. The coupon rate is...
Your company’s bonds are priced at $978 per $1,000 of par value. The coupon rate is 4.3%, paid semi-annually. There are 13 payments remaining to maturity. Your tax rate is 21%. What is your company’s cost of debt?
Amkor Corp. is financed by the following proportions of capital: Bonds: $65 million (70,000 bonds outstanding;...
Amkor Corp. is financed by the following proportions of capital: Bonds: $65 million (70,000 bonds outstanding; 8% annual coupon on $1,000 par; matures 15years), Common stock: $150 million (5 million shares outstanding, $3.00 dividend next year with 8% annual growth rate). Preferred stock: $25 million (500,000 shares outstanding, $6.00 dividend per share). Assume 30% tax rate. Compute costs of debt, equity, preferred stock and the WACC.
1. (Cost of Debt) CougarCo has the option to issue 15-year bonds at $1,300 flotation cost...
1. (Cost of Debt) CougarCo has the option to issue 15-year bonds at $1,300 flotation cost of 7% and a coupon rate of 6% (paid annually) with a face value of $1,000. What is CougarCo firm’s cost of debt prior to tax? 2. (Cost of Preferred Stock) The preferred stock of CougarCo will sell for $43.37 and pay a $3.75 dividend. The net price of the security after flotation costs will be $39.28. What is the cost of capital for...
The BondsRUs Company needs to estimate the cost of debt in their WACC calculation. The 10-year...
The BondsRUs Company needs to estimate the cost of debt in their WACC calculation. The 10-year bond issue would have $1,000 par value, 4% coupon rate, and pay interest semiannually. The bonds would sell for $950 per bond.   SHOW ALL WORK on the TI BAII Plus Calculator. a) (4 pts) What is the cost of debt? b) (2 pts) If the marginal tax rate of the company is 21%, what is the after-tax cost of debt to be used in...
.The firm's noncallable bonds mature in 15 years, have 7.50% annual coupon, a par value $1,000,...
.The firm's noncallable bonds mature in 15 years, have 7.50% annual coupon, a par value $1,000, and a market price of $1,075. The company’s tax rate is 40%. The risk-free rate is 2.50%, the market risk premium is 6.50%, and the stock’s beta is 1.30. The target capital structure consists of 35% debt, 10% preferred stock, and the balance is common equity. The preferred stock currently trades at $50 and has a dividend of $4 per share. What is the...
Boylan Metalworks Inc. has the following elements of capital: Debt: Boylan issued $1,000, 30-year bonds 10...
Boylan Metalworks Inc. has the following elements of capital: Debt: Boylan issued $1,000, 30-year bonds 10 years ago at a coupon rate of 9%. Five thousand bonds were sold at par. Similar bonds are now selling to yield 12%. Preferred Stock: Twenty thousand shares of 10% preferred stock were sold five years ago at their $100 par value. Similar securities now yield 13%. Equity: The Company was originally financed with the sale of 1,000,000 shares at $10 per share. The...
1. (Cost of Debt) CougarCo has the option to issue 15-year bonds at $1,300 flotation cost...
1. (Cost of Debt) CougarCo has the option to issue 15-year bonds at $1,300 flotation cost of 7% and a coupon rate of 6% (paid annually) with a face value of $1,000. What is CougarCo firm’s cost of debt prior to tax? =RATE(15,6%*1000,-1300*93%,1000) = 4.11% 2. (Cost of Preferred Stock) The preferred stock of CougarCo will sell for $43.37 and pay a $3.75 dividend. The net price of the security after flotation costs will be $39.28. What is the cost...
Avicorp has just issued some five-year bonds, with a 6% coupon rate. The debt has semi-annual...
Avicorp has just issued some five-year bonds, with a 6% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the face value is $1000. It is currently priced at 95% of par value. What is Avicorp’s pre-tax cost of debt (expressed in APR)?
The capital structure of a firm consists of debt and equity. The firm has 100,000 bonds...
The capital structure of a firm consists of debt and equity. The firm has 100,000 bonds outstanding that are selling at par value. The par value of the bonds is $1,000. Bonds with similar characteristics are yielding a before-tax return of 7%. The company also has 5 million shares of common stock outstanding. The stock has a beta of 1.30 and sells for $50 a share. The rate of return on U.S. Treasury bills is 5% and the market rate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT