4. Use the following information for questions in problem 4: The capital structure of Truman...
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4. Use the following information for questions in problem 4: The capital structure of Truman industries Inc. consists of bonds in common stock equity. TIs tax rate is 40%. The details on the various components of its capital structure are as follows: Bond: Type: Fixed Semi - annual coupon, non callable Maturity: 20 years Coupon Rate: 7% Par Value: 1000 Current Price: $850 Common Stock: Current Price: $18 Last annual dividend just paid : $2 Expected Growth Rate of dividends: 6% Beta: 1.4 Risk free rate: 3.5% Expected Return of the market: 11.50% Questions: a) What is the after -tax cost of debt of bond 1 b) Using the CAPM what is the after tax cost of Equity of the common stock of TI ? c) Truman Capital Structure consists of 60% in bonds with remainder in common stock eq
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