Question

7 Market to Book Ratio 1.00 Debt Ratio 40.00% Dividend Payout Ratio 60.00% Marginal Tax Rate 40.00% Earnings Per Share $ 4.17 Expected Net Income $ 6,000,000,000.00 Bond Coupon Rate 8.20% Bond Face Value $1,000.00 Years Until Mature 20 Bond Current Price $877.48 Current Stock Price $28.00 Stock Flotation Charge 20.00% a) before tax cost of debt 9.60% 9.60% b) after tax cost of debt 5.76% 5.76% c) cost of internal equity 15.43% d) cost of external equity 17.79% e) WACC using internal equity 11.56% f) WACC using external equity 12.98% g) break point for internal equity $4,000,000

          7 Market to Book Ratio
1.00
Debt Ratio
40.00%
Dividend Payout Ratio
60.00%
Marginal Tax Rate
40.00%
Earnings Per Share
$ 4.17
Expected Net Income
$ 6,000,000,000.00
Bond Coupon Rate
8.20%
Bond Face Value
$1,000.00
Years Until Mature
20
Bond Current Price
$877.48
Current Stock Price
$28.00
Stock Flotation Charge
20.00%
a) before tax cost of debt
9.60%
9.60%
b) after tax cost of debt
5.76%
5.76%
c) cost of internal equity
15.43%
d) cost of external equity
17.79%
e) WACC using internal equity
11.56%
f) WACC using external equity
12.98%
g) break point for internal equity
$4,000,000

7 Market to Book Ratio
1.00
Debt Ratio
40.00%
Dividend Payout Ratio
60.00%
Marginal Tax Rate
40.00%
Earnings Per Share
4.17
Expected Net Income 6,000,000,000.00
Bond Coupon Rate
8.20%
Bond Face Value
1,000.00
Years Until Mature
20
Bond Current Price877.48
Current Stock Price
28.00
Stock Flotation Charge
20.00%
a) before tax cost of debt
9.60%
9.60%
b) after tax cost of debt
5.76%
5.76%
c) cost of internal equity
15.43%
d) cost of external equity
17.79%
e) WACC using internal equity
11.56%
f) WACC using external equity
12.98%
g) break point for internal equity4,000,000

Added by Stacy R.

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