6. Robinson Inc.'s CFO is interested in calculating the cost of capital. In order to calculate...
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6. Robinson Inc.'s CFO is interested in calculating the cost of capital. In order to calculate the cost of capital, the company has collected the following information: The company's capital structure consists of 40 percent debt and 60 percent common stock. The company has bonds outstanding with 25 years to maturity. The bonds have a 12 percent annual coupon, a face value of $1,000, and a current price of $1,252. The company uses the CAPM to calculate the cost of common stock. Currently, the risk-free rate is 5 percent and the market risk premium, (km - KRF), equals 6 percent. The company's common stock has a beta of 1.6. The company's tax rate is 40 percent. What is the company's after-tax cost of debt? What is the company's cost of common equity? What is the company's weighted average cost of capital (WACC)? 6. Robinson Inc.'s CFO is interested in calculating the cost of capital. In order to calculate the cost of capital, the company has collected the following information: The company's capital structure consists of 40 percent debt and 60 percent common stock. The company has bonds outstanding with 25 years to maturity. The bonds have a 12 percent annual coupon, a face value of $1,000, and a current price of $1,252. The company uses the CAPM to calculate the cost of common stock. Currently, the risk-free rate is 5 percent and the market risk premium, (km - KRF), equals 6 percent. The company's common stock has a beta of 1.6. The company's tax rate is 40 percent. What is the company's after-tax cost of debt? What is the company's cost of common equity? What is the company's weighted average cost of capital (WACC)?
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To calculate the companys aftertax cost of debt we need to consider the bonds coupon rate price and ... View the full answer
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Posted Date:
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