Acompany’s 6% coupon rate, semiannual payment, $1000 par value bond that matures in 30 years sells at a price of $495.16. the company’s federal-plus-state tax rate is 40%. what is the firm’s after-tax component cost of debt? b/ the same firm can issue perpetual preferred stock at a price of $28 a share with annual dividend of $2.50 a share. what is the company’s cost of preferred stock? c/ the earnings, dividends, and stock price of the firm are expected to grow at 7% per year in the future. the firm’s common stock sells for $33 per share. the last dividend was $2.50. i/ using the discounted cash flow approach, what is the cost of equity. ii/ if the firm’s beta is 1.7, the risk-free rate is 9%, and the expected return of the market is 13%, then what would be the firm’s cost of equity based on the capm approach? iii/ if the judgmental risk premium is 4%, what would be the cost of equity using the over-own-bond-yield-plus-judgmental -risk-premium approach. iv/ what is the average of cost of equity using the three cost of equity calculated above? d/ the firm’s balance sheet shows $400 million in debt, $50 million in preferred stock, and $250 million in total common equity. the firm’s target capital structure is 30% debt, 5% preferred stocks, and 65% common stocks. what is wacc? assume that you take c/ iv/ result for the cost of equity.
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Acompany’s 6% coupon rate, semiannual payment, $1000 par value bond that matures in 30 years sells a...
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