Before tax cost of debt= (500/850)*4.36%+(350/850)*4.49%=4.41%
After tax cost of debt= Yield*(1-tax rate)=4.41%(1-30%)=3.09%
Option 4 is correct.
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YIM...
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YTM Bond A $500 Million 100.82 4.36% Bond B $350 Million 101.36 4.49% Common Stock 42.5 Million Shares $28.21 per share E(R) Market = 8.65% B = 1.27 Expected Dividend = $1.95 Rf = 2.10% Growth Rate = 2.75% Given this information, what is the total market value of the firm? Answer in millions. $1,835 0 $2,176 $2.058 $1,937
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YTM Bond A $500 Million 100.82 4.36% Bond B $850 Million 101.36 4.49% Common Stock 42.5 Million Shares $28.21 per share E(R) Market = 8.65% B = 1.31 Expected Dividend = $1.95 Rf = 2.25% Growth Rate = 2.75% Given this information, what is the estimated cost of equity for the firm using CAPM? 10.12% 10.96% 10.73% 10.34
A company has the following capital structure. 50,000 shares of common stocks outstanding, trading at Pcs,0 = $10 per share. 20,000 shares of preferred stocks trading at Pps,0 = $5 per share, that pays a 0.5 dollar dividend per share. The company also sold a 20-year non-amortized corporate bond worth 1 million at par in period 0, with a yield to maturity (YTM) of 5%. The corporation faces a tax rate of τ = 25%. The company’s period 0 dividend...
A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with a 10.5 percent coupon rate and another bond with an 8.1 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating...
A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with a 10.5 percent coupon rate and another bond with an 8.1 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating...