Question 16 1 pts The ABC Company has a cost of equity of 23.8 percent, a pre-ta
ID: 2814285 • Letter: Q
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Question 16 1 pts
The ABC Company has a cost of equity of 23.8 percent, a pre-tax cost of debt of 5percent, and a tax rate of 31 percent. What is the firm’s weighted average cost of capital if the proportion of debt is 39.9%?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
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Question 17 1 pts
The 8 percent annual coupon bonds of the ABC Co. are selling for $1,080.69. The bonds mature in 10 years. The bonds have a par value of $1,000. What is the before-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.
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Question 18 1 pts
ABC Inc.'s perpetual preferred stock sells for $72.5 per share, and it pays an $6.7 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of $4 per share. What is the company's cost of preferred stock for use in calculating the WACC?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
Explanation / Answer
16 WACC = 0.601*23.8 + 0.399*5*0.69 = 15.68%
17. PMT = 80, FV = 1000, PV = -1080.69, N = 10
use rate funciton in Excel
before tax cost = 6.86%
18. cost = 6.7/(72.5-4) = 9.78%