Compute the cost of debt-cost of equity and the wacc

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Problem: Three company is financed by the following proportions of capital?

Bonds = $65 million (70,000 bonds outstanding; 8% annual coupon on $1,000 par; matures 15 years).

Common Stock= $135 million (5million shares outstanding, $2.50 dividend next year with 8% annual growth rate).

Assume 35% tax rate.

Compute the Cost of Debt, Cost of Equity and the WACC. Please provide the authentic solution of this problem.

Reference no: EM131938474

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