Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 8%, and its common stock currently pays a $2.75 dividend per share (D0 = $2.75). The stock's price is currently $33.75, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 25%, and its WACC is 14.75%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 8%, and its common stock currently pays a $2.75 dividend per share (D0 = $2.75). The stock's price is currently $33.75, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 25%, and its WACC is 14.75%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.
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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Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 8%, and its common stock currently pays a $2.75 dividend per share (D0 = $2.75). The stock's price is currently $33.75, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 25%, and its WACC is 14.75%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.
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After tax cost of debt is = 8%(1-0.25) = 6%
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