1 To help finance a major expansion, a company sold a noncallable bond several years ago that now has 15 years to maturity. This bond has a 10.25% annual coupon, paid semiannually, it sells at a price of $985, and it has a par value of $1,000. If the company’s tax rate is 10%, what component cost of debt should be used in the WACC calculation?
2. You were hired as a consultant to a company, whose target capital structure is 30% debt, 10% preferred, and 60% common equity. The before-tax cost of debt is 6.0%, the cost of preferred is 8.0%, and the cost of retained earnings is 12.0%. The corporate tax rate is 21%. The firm will not be issuing any new stock. What is its WACC?
A stock is selling for $50 in the market. The required rate of return is 9%. The most recent dividend paid is D0 = $2.0 and dividends are expected to grow at a constant rate g. What’s the expected dividend yield for this stock?
d. 9.0%. Get Finance Help Today
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