2. Thor Industries finances its projects with 40% debts, 10% preferred stock and 50% common stock • The company can issue bonds at a yield to maturity of 8.4% The cost of preferred stock is 9% The risk free rate premium is 6.5%; market risk premium is 5% Beta is equal to 1.3 and company's tax rate is 30% • • Assume that the firm will be able to use retained earnings to fund the equity portion of its capital budget What is the company's weighted average cost of capital?
2. Thor Industries finances its projects with 40% debts, 10% preferred stock and 50% common stock • The company can issue bonds at a yield to maturity of 8.4% The cost of preferred stock is 9% The risk free rate premium is 6.5%; market risk premium is 5% Beta is equal to 1.3 and company's tax rate is 30% • • Assume that the firm will be able to use retained earnings to fund the equity portion of its capital budget What is the company's weighted average cost of capital?
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
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Transcribed Image Text:2. Thor Industries finances its projects with 40% debts, 10% preferred stock and 50%
common stock
The company can issue bonds at a yield to maturity of 8.4%
• The cost of preferred stock is 9%
The risk free rate premium is 6.5%; market risk premium is 5%
Beta is equal to 1.3 and company's tax rate is 30%
Assume that the firm will be able to use retained earnings to fund the equity
portion of its capital budget
What is the company's weighted average cost of capital?
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