Reference no: EM131411766
1. Avicorp has a $143 million debt issue outstanding. with a 6.1% coupon rate. The debt has semi-annual coupons. the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93% of par value.
a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual retuml
b. If Auicorp faces a 40% tax rate, what is its alter-tax cost of debt?
a. The costct debt is 1.1359 9‘: per year; (Round to four decimal places.)
b. If Auicorp faces a 40% tax rate, the alter-tax cost of debt is -%. (Round to four decimal places.)
Growth Company's current share price is $20.25 and it is expected to pay a $1.00 dividend per share next year. After that, the ?rm's dividends are expected to gro'iluI at a rate of 3.8% per year.
a. What is an estimate of Growth Company's cost of equity?I
b. Growth Company also has preferred stock outstanding that pays a $2.20 per share ?xed dividend. If this stock is ourrently prioed at $23.20, what is Growth Company's oost of preferred stock?
1:. Growth Company has existing debt issued three years ago with a coupon rate of 6.2%. The ?rm just issued new debt at par with a coupon rate of 6.3%. What is Growth Corn pany's cost of debt?
d. Growth Company has 4.6 million common shares outstanding and 1.4 million preferred shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value of $19.9 million. If Growth Company‘s common and preferred shares are priced as in parts (a) and {b}. what is the market value of Growth Corn pany's assets?
9. Growth Company faces a 35% tax rate. Given the information in parts [a] through (d), and your answers to those problems. what is Growth Company's WACC?
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: 1. Avicorp has a $143 million debt issue outstanding. with a 6.1% coupon rate. The debt has semi-annual coupons. the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93% of par value.
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