Intro Rough Travel Inc., an adventure travel company, wants to calculate its cost of capital and...

Transcribed Image Text:

Intro Rough Travel Inc., an adventure travel company, wants to calculate its cost of capital and collected the following information: The firm has one bond outstanding with a face value of $1,000, a coupon rate of 5%, paid annually, 15 years to maturity and a current price of $725.04. The company incurs flotation costs of $35 per bond. The firm's preferred stock pays an annual dividend of $4.38 forever, and each share is currently worth $73. Issuing new preferred stock costs $9 per share. The current common stock price is $26.21. The firm has just paid an annual dividend of $2.29, which is expected to grow by 3% per year. It costs $5 per share to issue new common stock. The firm has marginal tax rate of 21%. The company wants to maintain is current capital structure, which is 40% equity, 10% preferred stock and 50% debt. Part 1 What is the before-tax cost of debt? Attempt 2/10 for 10 pts. B+ decimals 3 Submit Intro Rough Travel Inc., an adventure travel company, wants to calculate its cost of capital and collected the following information: The firm has one bond outstanding with a face value of $1,000, a coupon rate of 5%, paid annually, 15 years to maturity and a current price of $725.04. The company incurs flotation costs of $35 per bond. The firm's preferred stock pays an annual dividend of $4.38 forever, and each share is currently worth $73. Issuing new preferred stock costs $9 per share. The current common stock price is $26.21. The firm has just paid an annual dividend of $2.29, which is expected to grow by 3% per year. It costs $5 per share to issue new common stock. The firm has marginal tax rate of 21%. The company wants to maintain is current capital structure, which is 40% equity, 10% preferred stock and 50% debt. Part 1 What is the before-tax cost of debt? Attempt 2/10 for 10 pts. B+ decimals 3 Submit