Assume that your firm's marginal tax rate is 35% and that your firm has the following capital structure:
Bonds:
coupon rate = 6%, yield-to-maturity = 7.5%, Market value of bonds = $25 million, Book value of bonds = $30 million
Common stock:
Book value of common shares = $25 million, Market value of common shares = $50 million, Required rate of return (r) = 12.60%
What is your firm’s Weighted Average Cost of Capital (report as a raw number, i.e. if it is 10.43%, plug in 10.43)?
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