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The​ after-tax cost of debt debt for the firm is____%

The​ after-tax cost of debt debt for the firm is____%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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a.  Currently bonds with a similar credit rating and maturity as the​ firm's outstanding debt are selling to yield
7.01
percent while the borrowing​ firm's corporate tax rate is
34
percent.
b.  Common stock for a firm that paid a
​$1.04
dividend last year. The dividends are expected to grow at a rate of
4.5
percent per year into the foreseeable future. The price of this stock is now
​$24.62.
c.  A bond that has a
​$1,000
par value and a coupon interest rate of
12.3
percent with interest paid semiannually. A new issue would sell for
​$1,147
per bond and mature in
20
years. The​ firm's tax rate is
34
percent.
d.  A preferred stock paying a dividend of
7.6
percent on a
​$96
par value. If a new issue is​ offered, the shares would sell for
​$83.45
per share.
 
 
 

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Part 1
a.  The​ after-tax cost of debt debt for the firm is____%
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