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

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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. Bob’s firm stock has a beta of 1.3,expected market return is 10%, risk-free rate 1%. The firmalso has 500 coupon bonds outstanding that have a face value of$1,000, a market price of $1,068, mature in 6 years and have a YTMof 5.648%. The tax rate is 35%.
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 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. Bob’s firm stock has a beta of 1.3,expected market return is 10%, risk-free rate 1%. The firmalso has 500 coupon bonds outstanding that have a face value of$1,000, a market price of $1,068, mature in 6 years and have a YTMof 5.648%. The tax rate is 35%.Compute cost of debtCompute cost of equityCompute WACC