What is the firm pretax cost of debt

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Reference no: EM132044670

1. GIMP Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 2 years to maturity that is quoted at 103.1 percent of face value. The issue makes annual payments and has an embedded cost (coupon rate) of 9.3 percent annually. What is the firm's pretax cost of debt? (Enter answer in percents.)

2. Information on Inkscape Co. is shown below. Assume the company's tax rate is 36 percent. The firm has no debt. Common stock: 240,685 shares outstanding, selling for $86.3 per share; beta is 1.08. Preferred stock: 28,220 shares of 5.8 percent preferred stock outstanding, currently selling for $84.7 per share. Market: 8.24 percent market risk premium and 3.87 percent risk-free rate. Calculate the WACC. Enter the answer in percents.

Reference no: EM132044670

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