Targaryen Corporation has a target capital structure of 50 percent common stock, 10 percent preferred stock, and 40 percent debt. Its cost of equity is 8 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 5 percent. The relevant tax rate is 38 percent. a. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Targaryen Corporation has a target capital structure of 50 percent common stock, 10 percent preferred stock, and 40 percent debt. Its cost of equity is 8 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 5 percent. The relevant tax rate is 38 percent. a. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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
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Transcribed Image Text:Targaryen Corporation has a target capital structure of 50 percent common stock, 10
percent preferred stock, and 40 percent debt. Its cost of equity is 8 percent, the cost of
preferred stock is 4 percent, and the pretax cost of debt is 5 percent. The relevant tax
rate is 38 percent.
a. What is the company's WACC? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.
What is the aftertax cost of debt? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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