4 Stone Temple Pilots (STP) has 32 millionshares outstanding trading for $12 pershare. In addition, STP has $100 million inoutstanding debt. Suppose STP's equitycost of capital is 15%, its debt cost of capitalis 7%, and the corporate tax rate is 39%.a. What is STP's unlevered cost of capital?b. What is STP's after-tax debt cost ofcapital?c. What is STP's weighted average cost ofcapital?

a) Total common stock value = 32 * 12 = 384 Total debt = 100 Total value = 384 + 100 = 484 Unlevered…

Answered: a. What is STP's unlevered cost of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 7P

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a. What is STP's unlevered cost of capital? b. What is STP's after-tax debt cost of capital? c. What is STP's weighted average cost of capital?