Reference no: EM13828733
Jungle Recording Co. reported after tax earnings of 4,000,000 availed to common stock this year. From that the company pays a dividend of $4.00 on each of its 1,000,000 common shares outstanding. The book value of the company is $10 million. The capital structure of company includes $40 million debt. its tax rate is 40% the cost of debt 7%.
1. If the market price of common stock is $40 and dividends are expected to remain the same forever. What is the company's cost of equity?
a. 5%,b. 10%, c. 20%, d, 0, e infinite
2. What is the after tax cost of debt?
a. 10%,b. 7 ,c. 4.2 .d 8.5 e. 7.1%
3. What is the before tax weighted average cost of the capital? (show work)
4. What is the after tax weighted average cost of the capital? (show work)
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: Jungle Recording Co. reported after tax earnings of 4,000,000 availed to common stock this year. From that the company pays a dividend of $4.00 on each of its 1,000,000 common shares outstanding. What is the before tax weighted average cost of the ca..
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