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Wacc
Following is an excerpt from Albion Corporation’s balance sheet.
Long-term debt (9% interest rate) $30,000,000 Preferred stock (100,000 shares, 12% dividend) 10,000,000 Common stock (5,000,000 shares outstanding) 60,000,000 Albion’s bonds are currently trading at $1,083.34, reflecting a yield to maturity of 8%. The preferred stock is trading at $125 per share. Common stock is selling at $16 per Share, and Albion’s treasurer estimates that the firm’s cost of equity is 17%. If Albion’s Effective income tax rate is 40%, what is the firm’s cost of capital? |
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