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ABC inc has the following optimal/ planned capital structure: 49% debt and 60% commin equity, its...

ABC inc has the following optimal/ planned capital structure: 49% debt and 60% commin equity, its tax rate is 40%, bonds selling for 882.21 and are mature in 10 years, woth annual cupoun 9% and face value of 1000$. beta on common stock is 1.6% and treasuery bond is 2.5% ans S& P average return is 5.5. what is the following?

A. weight on debt
B.weight in equity
C. pre tax cost of debt
D. cost of equity
E. WACC?

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Expert Solution

*Note-

In my opinion the debt should be 40% not 49% in capital structure. So I have solved the problem accordingly. If its otherwise,please let me know.

Please upvote if the ans is helpful. In case of doubt ,do commenr. Thanks.

jeff jeffy answered 1 year ago
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