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What is the cost of debt in the WACC

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Question - William Tell Computers has a book value of the firms equity that totals 10 million dollars, with book value per share of $20. The stocks sell for a price of 30 dollars per share. The firms bonds have a face value of 5 million dollars and sells at a price of 110% of face value. The yield to maturity on the bonds is 9% and the firms tax rate is 40%. The firm pays a constant dividend of 4.50 dollars that is not expected to change. We are interested in calculating the weighted average cost of capital (WACC).

What is the cost of debt in the WACC?

What are the respective weights of equity and debt in the capital structure?

What is the WACC?

Reference no: EM133091209

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