Question: CGT Co.s stock is currently selling for $15.25 per share, and they have 10,000,000 shares outstanding. They have $40,000,000 book value of 20-year, 9% coupon

CGT Co.’s stock is currently selling for $15.25 per share, and they have 10,000,000 shares outstanding. They have $40,000,000 book value of 20-year, 9% coupon semiannual bonds outstanding (40,000 bonds at $1,000 par value). Each bond is selling for $930.41. The firm’s beta is 1.22, and the risk-free rate is 3.5%. Further, the required return on the market is 11.5%, and the firm’s tax rate is 25%

What is the after-tax cost of debt?

What is the firm’s cost of equity, based on the CAPM?

Find the firm’s weights of debt and equity, and find the resulting WACC.

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To solve this well address each part of the problem step by step Step 1 AfterTax Cost of Debt 1 Calculate the beforetax cost of debt YTM We need to ca... View full answer

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