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The before-tax cost of debt

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Reference no: EM131851320

1. Suppose a company currently has some bonds outstanding in the market. The bonds have 10 years until maturity, they pay a coupon rate of 6% on a semi-annual basis. If the company's bonds are selling now for $965, what is the YTM? If the company's tax rate is 40%, what is its cost of debt?

2. A company's capital structure consists of 40% debt and 60% equity. The before-tax cost of debt is 12%, the cost of retained earnings is 15%, and the tax rate is 40%. What is this company's WACC?

Reference no: EM131851320

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