Find what is the weighted average cost of capital

Reference no: EM132002885

Question: Mouton Limited, Inc faced an after-tax cost of debt of 8.4% and a yield to maturity of 10.0%. What is its marginal tax rate? (Cost of common stock, retained earnings) MostDef, Inc's common stock has a beta coefficient of 1.5. The market risk premium is 8% and the risk-free rate of interest is 1.5%. MostDef pays $0.65 of cash dividend each quarter for each share of common stock, priced at $75 per share. a. What is MostDef's component cost of common equity using the dividend discount model? b. What is MostDef's component cost of common equity using the CAPM? c. Compute the arithmetic mean of the two costs from parts a and b. Provide an argument for using each of the three estimates as its component cost. (WACC) MacD has two components of capital, common stock and corporate bonds. Its capital mix is similar to that of its competitors at 5% bonds and 95% common stock. It has a 5.1% pre-tax cost of debt and a 12% cost of equity. If MacD is in the 35% marginal tax rate, what is its weighted average cost of capital?

Reference no: EM132002885

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