Citigroup\'s bond with 5 years to maturity has a face value of $1000 and a coupo

Question

Citigroup's bond with 5 years to maturity has a face value of $1000 and a coupon rate of 7%. The market price for the bond is $920. If Citigroup has an average corporate tax rate of 30%, what is the after tax cost of debt for the firm (figure out YTM first)? Cisco Co. just sold new shares of preferred stock to the financial market. The price for each share is $65, with a flotation cost of $5 per share. The anticipated dividends from this preferred stock .s $6 per share. What is the cost of preferred stock for Cisco Co.? A firm's common stock is expected to pay a dividend of $3.50 per share in one year. This dividend is expected to grow at a rate of 7% forever. If the current market price for a s is what is the cost of common stock for the firm? General Motor has the following capital structure: Common Stock 45%. Preferred Stock 15%, and Debt 40%. The cost for each type of capital is: Common Stock 12%. Preferred Stock 10%, and Debt 8%. What is the weighted average cost of capital (WACC) for GM? Microsoft has a WACC 9% with no preferred stock. Its cost of equity is 10% and after tax cost of debt is 6%. What is the weight of debt in its capital structure? AMD has only debt and equity in its assets without any preferred stock. Its D/E ratio is 1.5. It has an after tax cost of debt of 9% and a cost of equity of 12%. What is the WACC of AMD?

Explanation / Answer

Answer:14 Calculation of the after tax cost of Debt:

920=$70*PVIFA(r%,5)+$1000*PVIF(r%,5)

r=9.06%

After tax cost of Debt=9.06%(1-0.30)

=6.342%

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