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Pearson cost of common equity

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Reference no: EM131157326

The Holmes Company's currently outstanding bonds have an8% coupon and a 10% yield to maturity. Holmes believes it could issue new bonds at parthat would provide a similar yield to maturity. If its marginal tax rate is 40%, what isHolmes after-tax cost of debt?

Pearson Motors has a target capital structure of 30% debt and70% common equity, with no preferred stock. The yield to maturity on the company'soutstanding bonds is 9%, and its tax rate is 40%. Pearson' s CFO estimates that thecompany's WACC is 10.50%. What is Pearson's cost of common equity?

Reference no: EM131157326

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