Please Use TI BAII Plus Calculator and Show How You Get the Answer with it. Management of...

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Finance

Please Use TI BAII Plus Calculator and Show How You Getthe Answer with it.
Management of the SoSadItIsOver Company needs to determine itscost of capital in order to evaluate some large capital purchases.The company's bonds have a yield to maturity of 6%, last dividendpaid on common stock was $2.16 per share, current stock price is$47/share, and constant growth of 5% is expected on dividends andearnings. The company's capital structure is 30% debt, 70% equity.There is no preferred stock and the marginal tax rate is21%.Â Â Â SHOW ALL WORK.
a) 2 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)?

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4.1 Ratings (505 Votes)

aThe question is solved by first calculating the after tax costof debtAfter tax cost of debt Before tax cost of debt1 tax 61 021 6079 474bInformation See Answer

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