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Addisonjo04 Addisonjo04
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3 years ago
Rekall Inc., the memory implant company, has 7 million shares of common stock outstanding and 100,000 semi-annual bonds. The bonds have 6 years to maturity, a 9.05% coupon rate and a face value of $1,000 each. The common stock currently sells for $29.94 and just paid a dividend of $2.50. Dividends are paid annually and are expected to grow in perpetuity at 3%. The bonds sell for 94% of face value and have a 10.42% yield to maturity. The market risk premium is 5.5%, T-bills are yielding 5% and the tax rate is 30%. What is Rekall's cost of debt (after-tax)? Round to one decimal place.

▸ 7.3%

▸ 7.8%

▸ 8.6%

▸ 9.4%

▸ 10.4%
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Corporate Finance Online

Corporate Finance Online


Edition: 2nd
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rudy.zondorudy.zondo
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3 years ago
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Addisonjo04 Author
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3 years ago
Smart ... Thanks!
Smair87
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Yesterday
I appreciate what you did here, answered it right Smiling Face with Open Mouth
bioc
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2 hours ago
Thank you, thank you, thank you!
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