Compute the cost of capital for the firm

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Compute the cost of capital for the firm for the following: a. A bond that has a $1,000.00 par value (face value) and a contract or coupon interest rate of 11.6 percent. Interest payments are $58.00 and are paid semiannually. The bonds have current market values of $1121 and will mature in 10 years. The firm's marginal tax rate is 34 percent. b. A new common stock issue that paid a $1.81 dividend last year. The firm's dividends are expected to continue to grow at 7.1 percent per year, forever. The price of the firm's common stock is now $27.24. c. A preferred stock that sells for $138, pays a dividend of 9.3 percent, and has a $100 par value. d. A bond selling to yield 12.3 percent where the firm's tax rate is 34 percent.

a. The after-tax cost of debt is ___%

Reference no: EM13878424

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