Suppose you are given the following information for the Catch-them-all Inc.
Debt: 23,000 bonds outstanding, with a face value of $2,000. The bonds currently trade at 81.125% of par value, and have 30 years to maturity. The coupon rate equals 3%, and the bonds make semi-annual coupon payments.
Common stock: 825,000 shares of common stock outstanding; currently trading for $62.55 per share. The firm just paid a dividend of $3.94 per share, and dividends are expected to grow at 2% per year, forever.
Preferred stock: 150,000 shares of preferred stock outstanding; currently trading for $107.5 per share; pays a $4.82 dividend every year.
Tax rate: 35%
Calculate the before tax cost of debt (Rd), cost of equity capital, capital structure weight of debt, and weighted average cost of capital. (Enter percentages as decimals and round to 4 decimal places)
Suppose you are given the following information for the Catch-them-all Inc.
Debt: 23,000 bonds outstanding, with a face value of $2,000. The bonds currently trade at 81.125% of par value, and have 30 years to maturity. The coupon rate equals 3%, and the bonds make semi-annual coupon payments.
Common stock: 825,000 shares of common stock outstanding; currently trading for $62.55 per share. The firm just paid a dividend of $3.94 per share, and dividends are expected to grow at 2% per year, forever.
Preferred stock: 150,000 shares of preferred stock outstanding; currently trading for $107.5 per share; pays a $4.82 dividend every year.
Tax rate: 35%
Calculate the before tax cost of debt (Rd), cost of equity capital, capital structure weight of debt, and weighted average cost of capital. (Enter percentages as decimals and round to 4 decimal places)
Related questions
1) The capital structure weights used in computing the weighted average cost of capital are based on what values of the firm (i.e. book, adjusted book, market, etc):
| Debt | 50,000 bonds with 6.5 coupon rate, payable annually, $1,000 par value, 20 years to maturity, selling at 96.3. |
| Common Stock | 1,000,000 shares of common stock outstanding. The stock sells for a price of $40 per share and has a beta of 1.5 |
| Preferred Stock | 150,000 preferred shares outstanding, currently trading at $120 per share; with an annual dividend payment of $9.00 |
| Market | The market risk premium is 9% and the risk free rate is 3% |
| Tax Rate | 30% |
What is the before tax cost of debt?
What is the after tax cost of debt?
What is the company
