Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no preferred stock. Epson's beta is 1.1, the risk-free rate is 3.1% and the expected market risk premium is 6%. Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%. What is Epson's (pre-tax) cost of debt?
Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no preferred stock. Epson's beta is 1.1, the risk-free rate is 3.1% and the expected market risk premium is 6%. Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%. What is Epson's (pre-tax) cost of debt?
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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Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no
Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%.
What is Epson's (pre-tax) cost of debt?
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