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WACC and Percentage of Debt Financing

Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $3.00 dividend per share (D0 = $3.00). The stock's price is currently $20.75, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 35%, and its WACC is 13.00%. What percentage of the company's capital structure consists of debt? Round your answer to two decimal places.

__________ %

After-tax Cost of Debt

The Holmes Company's currently outstanding bonds have a 7% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.

____________ %

Financial Management, Finance

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