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What is Zonk after-tax cost of debt

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Question - Use the following financial data of Zonk Corporation to answer the next four questions. Zonk's Financial Information

Book value of debt capital $8,000,000

Book value of preferred equity capital $2,000,000

Book value of common equity capital $6,000,000

Number of common shares outstanding 1,000,000

Per share price of common stock $10

Per share price of preferred stock $50

Pretax borrowing rate 6%

Annual preferred dividend per share $4

Common equity beta 1.2

Effective income tax rate 20%

Required - What is Zonk's after-tax cost of debt?

Reference no: EM132987666

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