4. Feast Foods is interested in calculating its weighted average cost of capital. The company's CFO has collected the following information: The target capital structure consists of 40% debt and 60% common stock The company has a 20-year noncallable bonds with a par value of P1,000, a 9% annual coupon, and is selling now at 92-1/4. • Equity flotation costs are 2% The company's common stock has a beta of 0.80 The risk-free rate is 5%; and market risk premium is 4% The company's tax rate is 40%
4. Feast Foods is interested in calculating its weighted average cost of capital. The company's CFO has collected the following information: The target capital structure consists of 40% debt and 60% common stock The company has a 20-year noncallable bonds with a par value of P1,000, a 9% annual coupon, and is selling now at 92-1/4. • Equity flotation costs are 2% The company's common stock has a beta of 0.80 The risk-free rate is 5%; and market risk premium is 4% The company's tax rate is 40%
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 17P
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![4. Feast Foods is interested in calculating its weighted average cost of capital. The
company's CFO has collected the following information:
The target capital structure consists of 40% debt and 60% common stock
The company has a 20-year noncallable bonds with a par value of P1,000, a 9%
annual coupon, and is selling now at 92-1/4.
Equity flotation costs are 2%
The company's common stock has a beta of 0.80
The risk-free rate is 5%; and market risk premium is 4%
The company's tax rate is 40%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F152fd672-d4a8-478e-a284-20c08400c0c0%2Ff3827faa-ede9-4d1f-9379-f85e5fc640bd%2Fwddre1d_processed.png&w=3840&q=75)
Transcribed Image Text:4. Feast Foods is interested in calculating its weighted average cost of capital. The
company's CFO has collected the following information:
The target capital structure consists of 40% debt and 60% common stock
The company has a 20-year noncallable bonds with a par value of P1,000, a 9%
annual coupon, and is selling now at 92-1/4.
Equity flotation costs are 2%
The company's common stock has a beta of 0.80
The risk-free rate is 5%; and market risk premium is 4%
The company's tax rate is 40%
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