Calculate the after-tax cost of debt

Assignment Help Financial Management

Reference no: EM132072624

1. Cost of Equity: CAPM

Booher Book Stores has a beta of 1.0. The yield on a 3-month T-bill is 4.5% and the yield on a 10-year T-bond is 7%. The market risk premium is 5%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

_____ %

2. After-Tax Cost of Debt

Calculate the after-tax cost of debt under each of the following conditions:

a) Interest rate of 12%; tax rate of 0%. Round your answer to two decimal places.

_____%

b) Interest rate of 12%; tax rate of 25%. Round your answer to two decimal places.

_____ %

c) Interest rate of 12%; tax rate of 35%. Round your answer to two decimal places.

_____%

3. Cost of Equity: Dividend Growth

Summerdahl Resorts' common stock is currently trading at $38.00 per share. The stock is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25), and the dividend is expected to grow at a constant rate of 3% a year. What is the cost of common equity? Round your answer to two decimal places.

_____%

Reference no: EM132072624

Questions Cloud

Comparison of asset utilization ratios : Which of the following statements draws an INCORRECT implication from this comparison of asset utilization ratios?

What is your portfolio dollar return and percentage return : The table below shows your stock positions at the beginning of the year, What is your portfolio dollar return and percentage return?

Knowledge of financial statements : In healthcare organization With your knowledge of financial statements,

What is the current call price : What is the current bond price? What is the current call price?

Calculate the after-tax cost of debt : Calculate the after-tax cost of debt under each of the following conditions:

Unexpected low output this year due to flooding : If a country has an unexpected low output this year due to flooding,

Zero growth in dividends-what is the value of each share : Assuming zero growth in dividends, what is the value of each share?

Monthly interest rate to yearly based interest rate : Modify the monthly interest rate to yearly based interest rate. Which instrument on the marker would be cheaper for company?

Production of a good to have comparative advantage : Is it necessary for a country to have absolute advantage in the production of a good to have comparative advantage in it?

User Account

All Pages