At a market price of $26 per share, The Seattle, Inc. has 20,000 shares of common stock outstanding. This stock was first offered at a price of $19 per share. In addition, the company has a bond issue with a total face value of $300,000 that is selling for 97 percent of its face value. The cost of equity is 10%, while the cost of debt after taxes is 5%. The company has a beta of 1.2 and a 35 percent tax rate. What is the weighted average cost of capital in The Seattle, Inc.

At a market price of $26 per share, The Seattle, Inc. has 20,000 shares of common stock outstanding. This stock was first offered at a price of $19 per share. In addition, the company has a bond issue with a total face value of $300,000 that is selling for 97 percent of its face value. The cost of equity is 10%, while the cost of debt after taxes is 5%. The company has a beta of 1.2 and a 35 percent tax rate. What is the weighted average cost of capital in The Seattle, Inc.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 15P

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