Question: ABC has the following market value capital structure, shown below, which is considered to be optimal. The firm has no preferred stock. Debt $ 4

ABC has the following market value capital structure, shown below, which is considered to be optimal. The firm has no preferred stock.
Debt $400,000
Equity $600,000
New bonds currently have a 10% coupon rate and ABC's stock sells for $40 per share. ABCs EPS was $6.80 in 2023 and $4.40 in 2018. The corporate tax rate is 40 percent and the firm paid out 30% of its earning out as dividends. What is the firms cost of capital?

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