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Task 2: Weighted Average Cost of Capital (WACC) You are given the following Information for Lifetime, Inc. Assume the company's tax rate is 21%. Debt: 150,000 bonds outstanding with 7.5% coupon mate $1,000 par value, 20 years to maturity, selling for $1030; the bonds make semiannual payments. Common stock: 1,700,000 shares outstanding, selling for $45 per share the beta is 0.95. Preferred stock: 120,000 shares of 6% preferred stock, currently selling for $85 per share. Market: 7% market risk premium and 2% risk free rate Questions: 3. What is the company's after-tax cost of debt? (5 point) 4. What is the company's cost of common stock? (5 point) I c 1 2 3 4 5 7 9 10 Input Debt Settlement date Maturity date Bonds outstanding 6 Annual coupon rate Face value ($) Coupons per year Years to maturity Bond price ($) Common stock Shares outstanding 13 Beta Share price ($) Preferred stock 16 Shares outstanding 17 Coupon rate 18 Share price (S) 19 Market 20 Market risk premium Din fuan 11 12 14 15 27 D E F G 19 20 21 22 23 24 Market Market risk premium Risk-free rate Tax rate 25 Calculation & Output 26 27 28 30 Market value of debt Market value of equity 29 Market value of preferred Market value of firm Market value capital structure 32 Weight of Debt 33 Weight of Common Stock 34 Weight of Preferred Stock Question 3 37 Pretax cost of debt Aftertax cost of debt Question 4 35 39 Task 2: Weighted Average Cost of Capital (WACC) You are given the following Information for Lifetime, Inc. Assume the company's tax rate is 21%. Debt: 150,000 bonds outstanding with 7.5% coupon mate $1,000 par value, 20 years to maturity, selling for $1030; the bonds make semiannual payments. Common stock: 1,700,000 shares outstanding, selling for $45 per share the beta is 0.95. Preferred stock: 120,000 shares of 6% preferred stock, currently selling for $85 per share. Market: 7% market risk premium and 2% risk free rate Questions: 3. What is the company's after-tax cost of debt? (5 point) 4. What is the company's cost of common stock? (5 point) I c 1 2 3 4 5 7 9 10 Input Debt Settlement date Maturity date Bonds outstanding 6 Annual coupon rate Face value ($) Coupons per year Years to maturity Bond price ($) Common stock Shares outstanding 13 Beta Share price ($) Preferred stock 16 Shares outstanding 17 Coupon rate 18 Share price (S) 19 Market 20 Market risk premium Din fuan 11 12 14 15 27 D E F G 19 20 21 22 23 24 Market Market risk premium Risk-free rate Tax rate 25 Calculation & Output 26 27 28 30 Market value of debt Market value of equity 29 Market value of preferred Market value of firm Market value capital structure 32 Weight of Debt 33 Weight of Common Stock 34 Weight of Preferred Stock Question 3 37 Pretax cost of debt Aftertax cost of debt Question 4 35 39