Management of the SoSadItIsOver Company needs to determine its cost of capital in order to evaluate some large capital purchases. The company’s bonds have a yield to maturity of 6%, last dividend paid on common stock was $1.50 per share, current stock price is $30/share, and constant growth of 5% is expected on dividends and earnings. The company’s capital structure is 30% debt, 70% equity. There is no preferred stock and the marginal tax rate is 35%. SHOW ALL WORK FOR FULL CREDIT.a) 4 pts. What is the after-tax cost of debt?b) 4 pts. What is the cost of equity?c) 6 pts. What is the company’s cost of capital (WACC)?
RECOMMENDED!!ECON 321 – Management of the So Sad It Is Over Company needs to determine its cost of capital
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