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Determine the after-tax costs of the bank loan

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Voice River, Inc., is interested in estimating its WACC now that it is in its rapid-growth stage. Voice River has a $500,000, 10 percent interest, short-term bank loan; a $1.5 million, 12 percent interest, long-term debt issue; and $42 million in common equity. The venture is in the 35 percent income tax bracket.

A. Determine the after-tax costs of the bank loan and the long-term debt issue.

B. Calculate the WACC for Voice River, Inc., using the cost of common equity capital estimated in Problem 12.

Reference no: EM131123717

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