Below is information regarding the capital structure of Micro Advantage Incorporated On the basis of this information you are asked to respond to the following three questions: Required: 1. Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (1.e., 98% of par value) with a stated rate of 9% Today, the bond is selling at 110 (i.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par value of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the after-tax cost of the preferred stock? 3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (.e., 98% of par value) with a stated rate of 9%. Today, the bond is selling at 110 (.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after- tax cost of this debt? (Round your answer to 2 decimal places. (.e. 1234 = 12.34%)) Current after-tax cost of this debt
Below is information regarding the capital structure of Micro Advantage Incorporated On the basis of this information you are asked to respond to the following three questions: Required: 1. Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (1.e., 98% of par value) with a stated rate of 9% Today, the bond is selling at 110 (i.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par value of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the after-tax cost of the preferred stock? 3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (.e., 98% of par value) with a stated rate of 9%. Today, the bond is selling at 110 (.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after- tax cost of this debt? (Round your answer to 2 decimal places. (.e. 1234 = 12.34%)) Current after-tax cost of this debt
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 17P
Related questions
Question
Transcribed Image Text:Below is information regarding the capital structure of Micro Advantage Incorporated On the basis of this information you are asked to
respond to the following three questions:
Required:
1. Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (.e., 98% of par value) with a stated rate of 9%
Today, the bond is selling at 110 (i.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt?
2. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par
value of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the
after-tax cost of the preferred stock?
3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common
stock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market
return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (.e., 98% of par value) with a stated rate
of 9%. Today, the bond is selling at 110 (.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after-
tax cost of this debt? (Round your answer to 2 decimal places. (.e. 1234 = 12.34%))
Current after-tax cost of this debt
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT