Solution-What is the firm cost of common equity

What is the firm cost of common equity

Reference no: EM132731494

R.S. Green has 200,000 shares of common stock outstanding at a market price of $25 a share. The company just paid a dividend of $1.55 a share. Green's stock is three times as risky as the market portfolio. The market return is 8.5 percent and the risk-free rate is 3.7 percent.

The firm also has 4,500 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7 percent coupon, pay interest annually, and mature in 7.5 years. The bonds are selling at 108 percent of face value. The company's tax rate is 34 percent.

1.What is the firm's cost of common equity?

2.What is the firm's pre-tax cost of debt?

3.What is the firm's after-tax cost of debt?

Reference no: EM132731494

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What is the firm cost of common equity : R.S. Green has 200,000 shares of common stock outstanding at a market price of $25 a share. The company just paid a dividend of $1.55 a share.

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What is the firm cost of common equity

Reference no: EM132731494

Reference no: EM132731494

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