Galaxy Enterprises in 2024 has long-term debt of $50 million at an average interest rate of 8%. Its market capitalization is $60 million. The tax rate is 42%, and the cost of equity is 12%. The company also has a new car worth $30,000 and a painting worth $700,000. Determine the WACC. Calculate the after-tax cost of debt for the Crestview Clinic, given: • The coupon rate on its debt is 8 percent. • The tax rate is 35 percent. • Crestview Clinic also has annual software expenses of $2,000 and recently completed a building renovation costing $100,000.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 14P
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Galaxy Enterprises in 2024 has long-term debt of $50 million at an average interest rate of 8%.
Its market capitalization is $60 million. The tax rate is 42%, and the cost of equity is 12%. The
company also has a new car worth $30,000 and a painting worth $700,000. Determine the
WACC. Calculate the after-tax cost of debt for the Crestview Clinic, given:
•
The coupon rate on its debt is 8 percent.
• The tax rate is 35 percent.
•
Crestview Clinic also has annual software expenses of $2,000 and recently completed a
building renovation costing $100,000.
Transcribed Image Text:Galaxy Enterprises in 2024 has long-term debt of $50 million at an average interest rate of 8%. Its market capitalization is $60 million. The tax rate is 42%, and the cost of equity is 12%. The company also has a new car worth $30,000 and a painting worth $700,000. Determine the WACC. Calculate the after-tax cost of debt for the Crestview Clinic, given: • The coupon rate on its debt is 8 percent. • The tax rate is 35 percent. • Crestview Clinic also has annual software expenses of $2,000 and recently completed a building renovation costing $100,000.
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