ABC Company has publicly traded $1,000 par value, 6% semiannual coupon bonds which mature in 16 years. These bonds have a current market price of $1075. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABC's common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The company's average tax rate is 30%. What is this company's after-tax cost of debt? 3.91% O 3.71% 3.07% O3.38%
ABC Company has publicly traded $1,000 par value, 6% semiannual coupon bonds which mature in 16 years. These bonds have a current market price of $1075. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABC's common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The company's average tax rate is 30%. What is this company's after-tax cost of debt? 3.91% O 3.71% 3.07% O3.38%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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