Q21) Ewha Corp has $120,000,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 10.0 percent. The company also has 2,000,000 shares of preferred stock which pays dividend of $9 every year and 3,000,000 shares of common stock outstanding. The preferred stock sells for $60 a share. The common stock has a beta of 1.5 and sells for $50 a share. The risk-free rate is 2.2 percent and the return on the market is 11.2 percent. The corporate tax rate is 40 percent. What is the firm's weighted average cost of capital?
Q21) Ewha Corp has $120,000,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 10.0 percent. The company also has 2,000,000 shares of preferred stock which pays dividend of $9 every year and 3,000,000 shares of common stock outstanding. The preferred stock sells for $60 a share. The common stock has a beta of 1.5 and sells for $50 a share. The risk-free rate is 2.2 percent and the return on the market is 11.2 percent. The corporate tax rate is 40 percent. What is the firm's weighted average cost of capital?
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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Transcribed Image Text:Q21)
Ewha Corp has $120,000,000 bonds outstanding that are selling at par. Bonds with similar
characteristics are yielding 10.0 percent. The company also has 2,000,000 shares of preferred
stock which pays dividend of $9 every year and 3,000,000 shares of common stock
outstanding. The preferred stock sells for $60 a share. The common stock has a beta of 1.5
and sells for $50 a share. The risk-free rate is 2.2 percent and the return on the market is 11.2
percent. The corporate tax rate is 40 percent. What is the firm's weighted average cost of
capital?
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