Question #50988

Micro Spin offs Inc, issued 20-year debt a year ago at par value with a coupon rate of 9%, paid annually. Today, the debt is selling at $1050. If the firm's tax bracket is 35%, what is its after tax cost of debt?
1. Micro spinoffs also has preferred stock outstanding. The stock pays a dividend of $4 per share, and the stock sells for $40. What is the cost of preferred stock?
2. Suppose Micro Smirnoff's cost of equity is 12.5%. What is the WACC if equity is 50%, preferred stock is 20% and debt is 30% of total capital.

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