Bob's firm is a retail chain of specialty hardware stores. The firm has 21,000 shares of...

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Finance

Bob's firm is a retail chain of specialty hardware stores. Thefirm has 21,000 shares of stock outstanding that are currentlyvalued at $68 a share. Just paid a dividend of $5. Dividendgrows at 3% annually. The firm also has 500 coupon bondsoutstanding that have a face value of $1,000, a market price of$1,068, mature in 6 years and have a YTM of 5.648%. The tax rate is35%.
Compute cost of debt
Compute cost of equity
Compute WACC

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Debt Number of bonds outstanding 500 Current Price 1068 Market Value of Debt 500 1068 Market Value of Debt 534000 Annual YTM 5648 Beforetax Cost of Debt 5648 Aftertax Cost of Debt 5648 1 See Answer

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Bob's firm is a retail chain of specialty hardware stores. Thefirm has 21,000 shares of stock outstanding that are currentlyvalued at $68 a share. Just paid a dividend of $5. Dividendgrows at 3% annually. The firm also has 500 coupon bondsoutstanding that have a face value of $1,000, a market price of$1,068, mature in 6 years and have a YTM of 5.648%. The tax rate is35%.Compute cost of debtCompute cost of equityCompute WACC