The outstanding bonds of Tech Express are priced at $989 and mature in 10 years.

Question

The outstanding bonds of Tech Express are priced at $989 and mature in 10 years. These bonds have a 6 percent coupon and pay interest annually. The firm's tax rate is 35 percent. What is the firm's aftertax cost of debt? 4.0 percent 4.41 percent 3.1 percent 3.22 percent 3.35 percent Jensen's Travel Agency has 10 percent preferred stock outstanding that is currently selling for $26 a share. The market rate of return is 8 percent and the firm's tax rate is 34 percent. What is Jensen's cost of preferred stock? 13.08 percent 6.60 percent 30.77 percent 11.05 percent 38.46 percent The Shoe Outlet has paid annual dividends of $0.65, S0.70. $0.72, and $0.75 per share over the last four years, respectively. The stock is currently selling for S26 a share. What is this firm's cost of equity? 10.38 percent 7.56 percent 11.79 percent 7.93 percent 10.53 percent

Explanation / Answer

Answer:7

YTM of the bond =[ Interest + {(Face value

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