What is the firm after-tax cost of debt

Assignment Help Finance Basics
Reference no: EM132731500

R.S. Green has 200,000 shares of common stock outstanding at a market price of $25 a share. The company just paid a dividend of $1.55 a share. Green's stock is three times as risky as the market portfolio. The market return is 8.5 percent and the risk-free rate is 3.7 percent.

The firm also has 4,500 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7 percent coupon, pay interest annually, and mature in 7.5 years. The bonds are selling at 108 percent of face value. The company's tax rate is 34 percent.

1.What is the firm's cost of common equity?

2.What is the firm's pre-tax cost of debt?

3.What is the firm's after-tax cost of debt?

Reference no: EM132731500

Questions Cloud

What is the company cost of equity-jean outlet : The Jean Outlet is an all-equity firm but can borrow at 5.8 percent. The firm's WACC is currently 12.5 percent, and the tax rate is 28 percent. Consider taxes.
What equivalent units of direct material start during june : The firm employs a process costing system for its manufacturing. What are the equivalent units of direct material started during June, using the FIFO method?
Why might a moral hazard problem still exist : Consider a small company run by a manager who is also the owner. If this company borrows funds, why might a moral hazard problem still exist?
Find and make journal entries to record the transactions : Find and make journal entries to record the transactions related to the acquisition of capital assets. The company does not use encumbrance accounting.
What is the firm after-tax cost of debt : R.S. Green has 200,000 shares of common stock outstanding at a market price of $25 a share. The company just paid a dividend of $1.55 a share.
What equivalent units of direct material start during june : The firm employs a process costing system for its manufacturing. What are the equivalent units of direct material started during June, using the FIFO method?
What will the wacc be in the levered firm : The Jean Outlet is an all-equity firm but can borrow at 5.8 percent.
Reflects on your professional growth : What were your strengths at the beginning of the program and how did you leverage them to succeed - Reflects on your professional growth during the master
Find what are the debits and credits : Find What are the Debits and Credits, and the increases and decreases associated with these accounts? Loss on sale of equity affiliated

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd