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The after-tax cost of equity funding

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Reference no: EM133227478

David and Amelia's Toy Manufacturing, Inc

Assignment: Determine

- The after-tax cost of equity funding?

- The after-tax cost of long-term debt funding?

- The book value weights?

- The marginal or market value weights?

- The after-tax weighted average cost of capital (WACC) at book value?

- The after-tax weighted average cost of capital (WACC) at market value?

- Marginal Tax Bracket: 21%

Equity Information

- 50 million shares

- Issued with $40 Par value

- Sold at $40 per share, no excess

- Market Price: $80 per share

- D0 = $5.15

- Growth Rate = 5.0%

- Flotation Cost = 9.0%

- Retained Earnings = $1 billion

Debt Information

- $1 billion in outstanding debt

- $1,000 face value per bond

- Current quote = 110

- Coupon rate = 9%, semiannual coupons

- 15 years to maturity

- Flotation Cost = 2%

Reference no: EM133227478

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