What is the company discount rate

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Sweetums Manufacturing (SM) Inc. has 3 million shares of common stock and 150,000 bonds outstanding. SM just paid a dividend of $3 per share and expect this dividend to grow 2% for the foreseeable future. The beta on this stock is 1.7, U.S treasury bills are yielding 1%, and the expected return on the market is 9%. SM bonds have 10 years to maturity, pay a 7% coupon, and currently sell at 116 percent of par value. The firm has an average tax rate of 25%. What is the company's discount rate?

Reference no: EM131896835

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