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Suppose you are given the following information for the Curley-Sue Inc.

Debt: 50,000 bonds outstanding, with a face value of $1,000. The bonds currently trade at 101.5% of par value, and have 15 years to maturity. The coupon rate equals 5%, and the bonds make semi-annual coupon payments.

Common stock: 1,250,000 shares of common stock outstanding; currently trading for $82.95 per share. The firm just paid a dividend of $1.35 per share, and dividends are expected to grow at 12% per year, forever.

Preferred stock: 250,000 shares of preferred stock outstanding; currently trading for $92.00 per share; pays a $6.10 dividend every year.

Tax rate: 30%

Calculate the before tax cost of debt (Rd), cost of equity capital (Re), capital structure weight of preferred stock, weighted average cost of capital. (Enter percentages as decimals and round to 4 decimal places)

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92360341

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