30. AllCity, Inc., is financed 40% with debt, 10% with preferred stock, and 50% with common stock. Its pretax cost of debt is 6%, its preferred stock pays an annual dividend of $2.50 and is priced at $30. It has an equity beta of 1.1. Assume the risk-free rate is 2%, the market risk premium is 7% and AllCity's tax rate is 25%. What is its after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. The WACC is _____%. (Round to two decimal places.)
30. AllCity, Inc., is financed 40% with debt, 10% with preferred stock, and 50% with common stock. Its pretax cost of debt is 6%, its preferred stock pays an annual dividend of $2.50 and is priced at $30. It has an equity beta of 1.1. Assume the risk-free rate is 2%, the market risk premium is 7% and AllCity's tax rate is 25%. What is its after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. The WACC is _____%. (Round 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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30. AllCity, Inc., is financed 40% with debt, 10% with preferred stock, and 50% with common stock. Its pretax cost of debt is 6%, its
Note: Assume that the firm will always be able to utilize its full interest tax shield.
The WACC is _____%.
(Round to two decimal places.)
(Round to two decimal places.)
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