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What is the cost of equity

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Reference no: EM133204660

Jake's Sound Systems has 210,000 shares of common stock outstanding with a book value of $10 and currently selling for $30 a share. They just paid an annual dividend in the amount of $1.60 per share. The constant dividend growth rate is 4%. Jake's also has 6,000 bonds outstanding. The bonds carry a 7 % coupon, pay interest semi-annually, and mature in 5 years. The bonds are selling at par. There are 5,000 8% preferred shares outstanding with a stock price of $80. The company's tax rate is 34%. The current T-bills rate is 3% and the market risk premium is 4%.

A) What is the cost of equity?

B) What is the cost of preferred shares?

C) What is the after-tax cost of debt?

D) What is the WACC (weighted average cost of capital)?

Reference no: EM133204660

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