Part A. Cost of Debt - Micro Spinoffs Inc., issued 20 year debt a year ago at coupon rate at 8 percent annually. Today the debt is selly at $1050.
If the firms tax bracket is 35%, what is the afer-tax cost of the debt?
Part B. Cost of Preferred Stock - Micro Spinoffs also has preferred stock that is outstanding. The stock pays a divident of $4 per share, the stock sells for $40.
What is the cost of the preferred stock?
Part C. Cost of Equity - Reliable Electricity is a regulated public utility, and is expected to provide steady growth of dividents of 5 percent per year for the indefinite future. It's last dividend was $5 a share; the stock sold for $60 a share just after the divident was paid.
What is the company's cost of equity?
What is its WACC?© BrainMass Inc. brainmass.com September 25, 2018, 7:00 am ad1c9bdddf - https://brainmass.com/business/weighted-average-cost-of-capital/micro-spinoffs-inc-250157
Part A. Cost of Debt - Micro Spinoffs Inc., issued 20 year debt a year ago at coupon rate at 8 percent annually. Today the debt is selling at $1050.
If the firms tax bracket is 35%, what is the after-tax cost of the debt?
where B is the issued price/current price
C is the coupon payment
r is the current interest rate
n is the period/year to maturity
n = 20 - 1 = 19
1050 = 80 x [1 ...
This solution is comprised of a detailed explanation to answer what is the afer-tax cost of the debt.