Below is information regarding the capital structure of Micro Advantage Incorporated On the basis of this information you are asked to espond to the following three questions: Required: Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 9%. oday, the bond is selling at 110 (i.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par alue of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the fter-tax cost of the preferred stock? . In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common tock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market eturn on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 31 In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? (Round "After-tax Rate or Expected Return" and "Cost of Capital Components" to 2 decimal places (i.e. .1234 = 12.34%), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.) Bond Preferred stock Common stock Total Book Value $5,000,000 $5,000,000 Answer is complete but not entirely correct. $ 500,000 $ 10,500,000 Interest or Dividend Rate 9✔ % 10 % 0 % Current Market Values After-tax Rate or Expected Return 7.00 % S 5,500,000 10.00 % S 6,000,000 20.00 % S 8,500,000 20,000,000 $ ( Required 2 Required 3 > Weights 0.275 0.300 0.043 X 0.618 Cost of Capital Components 1.58% 3.00 % 8.50 % 13.08 % Show less A

Below is information regarding the capital structure of Micro Advantage Incorporated On the basis of this information you are asked to espond to the following three questions: Required: Micro Advantage issued a $5,000,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 9%. oday, the bond is selling at 110 (i.e., 110% of par value). If the firm's tax bracket is 30%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,000,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par alue of $25 and pays a $3 dividend per year. The current market price is $30 per share. The firm's tax bracket is 30%. What is the fter-tax cost of the preferred stock? . In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common tock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market eturn on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 31 In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 50,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $170 per share. The expected after-tax market return on the firm's common equity is 20%. What is Micro Advantage's weighted-average cost of capital (WACC)? (Round "After-tax Rate or Expected Return" and "Cost of Capital Components" to 2 decimal places (i.e. .1234 = 12.34%), "Weights" to 3 decimal places, and other answers to the nearest whole dollar amount.) Bond Preferred stock Common stock Total Book Value $5,000,000 $5,000,000 Answer is complete but not entirely correct. $ 500,000 $ 10,500,000 Interest or Dividend Rate 9✔ % 10 % 0 % Current Market Values After-tax Rate or Expected Return 7.00 % S 5,500,000 10.00 % S 6,000,000 20.00 % S 8,500,000 20,000,000 $ ( Required 2 Required 3 > Weights 0.275 0.300 0.043 X 0.618 Cost of Capital Components 1.58% 3.00 % 8.50 % 13.08 % Show less A

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

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