Management of the So Sad It Is Over Company needs to determine its cost of capital in
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Management of the “So Sad It Is Over Company” needs to determine its cost of capital in order to evaluate some large capital purchases. The company's bonds have a yield to maturity of 7%, last dividend paid on common stock was $1.60 per share, current stock price is $30/share, and constant growth of 5% is expected on dividends and earnings. The company's capital structure is 30% debt, 70% equity. There is no preferred stock and the marginal tax rate is 21%.
a) What is the after-tax cost of debt?
b) What is the cost of equity?
c) What is the company's cost of capital (WACC)?
Related Book For
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
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