Below is information regarding the capital structure of Micro Advantage Incorporated. On the basis of this information you are asked to respond to the following three questions: COMPLETED1. Micro Advantage issued a $6,000,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 9%. Today, the bond is selling at 105 (i.e., 105% of par value). If the firm’s tax bracket is 30%, what is the current after-tax cost of this debt? COMPLETED2. Micro Advantage has $5,600,000 preferred stock outstanding that it sold for $22 per share. The preferred stock has a per share par value 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 after-tax cost of the preferred stock? REQUESTING ASSISTANCE ON BOLD PORTION3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro
Below is information regarding the capital structure of Micro Advantage Incorporated. On the basis of this information you are asked to respond to the following three questions:
COMPLETED1. Micro Advantage issued a $6,000,000 par
COMPLETED2. Micro Advantage has $5,600,000
REQUESTING ASSISTANCE ON BOLD PORTION3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 76,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $150 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)? (SEE IMAGE)
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