Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Targaryen Corporation has a target capital structure of 65 percent common stock, 10
percent preferred stock, and 25 percent debt. Its cost of equity is 13 percent, the cost of
preferred stock is 6 percent, and the pretax cost of debt is 7 percent. The relevant tax
rate is 25 percent.
a. What is the company's WACC? (Do not round Intermedlate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the aftertax cost of debt? (Do not round Intermedlate calculatlons and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a.
WACC
%
b. Cost of debt
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Transcribed Image Text:Targaryen Corporation has a target capital structure of 65 percent common stock, 10 percent preferred stock, and 25 percent debt. Its cost of equity is 13 percent, the cost of preferred stock is 6 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 25 percent. a. What is the company's WACC? (Do not round Intermedlate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round Intermedlate calculatlons and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. WACC % b. Cost of debt
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