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1) David Ortiz Motors has target capital structure of 30% debt and 70% equity. Yield to maturity on company's outstanding bonds is 8%, and company's tax rate is= 40%. Ortiz's CFO has computed company's WACC as 9.54%. Determine the company's cost of equity capital?

Bond Yield and After-Tax Cost of Debt

2) A company's 8% coupon rate, semi-annual payment= $1,000 par value bond which matures in 30 years sells at the price of= $693.01. Company's federal-plus-state tax rate is= 30%. Determine the firm's after-tax component cost of debt for purposes of computing WACC?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914711

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