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Weighted average costs of capital of china corporation

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Reference no: EM13115356

China Corp. has a current capital structure of $18 million in secured bonds paying 6.5% annual interest, $8 million in preferred stock with a par value of $50 per share and an annual dividend of $3.80 per share, and common stock with a book value of $42 million. It is about to issue new debentures in the amount of $9 million paying 7.5% annual interest. Its CFO says its marginal tax rate is 28% and its cost of common equity capital is 2%. Calculate the company's Weighted Average Costs of Capital for the following:

a. Before the new bond issue.

b. After the new bond issue.

Reference no: EM13115356

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