11. Strolling Corporation is constructing its Cost of Capital schedule. The firm is at its target capital structure. Its

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11. Strolling Corporation is constructing its Cost of Capital
schedule. The firm is at its target capital structure. Its 15 year
bonds have a 5.5 % coupon rate and sell for $948. Bond coupons are
semi-annual. Rolling's stock beta is 1.4, the risk-free rate is 3.0
%, and the market risk premium on the market portfolio is 7.0%.
Rolling is a constant growth firm, and just paid a dividend of
$1.50. The stock sells for $37.00 and has a growth rate of 5.1%.
The firm's tax rate is 30%. The firm's book value balance sheet is
as follows: Assets $36,100, Long Term Debt $35,000, Equity ($1.00
par) $3,874, Retained Earnings -$4,274, Comprehensive Income 1,500.
To the nearest .1%, what is the weight of debt that should be used
used in computing the Weighted Average Cost of Capital?
Strolling Corporation is constructing its Cost of Capital
schedule. The firm is at its target capital structure. Its 15 year
bonds have a 5.5 % coupon rate and sell for $948. Bond coupons are
semi-annual. Rolling's stock beta is 1.4, the risk-free rate is 3.0
%, and the market risk premium on the market portfolio is 7.0%.
Rolling is a constant growth firm, and just paid a dividend of
$1.50. The stock sells for $37.00 and has a growth rate of 5.1%.
The firm's tax rate is 30%. The firm's book value balance sheet is
as follows: Assets $36,100, Long Term Debt $35,000, Equity ($1.00
par) $3,874, Retained Earnings -$4,274, Comprehensive Income 1,500.
To the nearest .1%,
what is the weight of debt that should be used used in computing
the Weighted Average Cost of Capital?
______________
________________To the nearest .1%, what is the pre-tax cost of
debt?
_________________To the nearest .1%, what is the cost of
retained earnings using the Constant Growth Model?
______________To the nearest .1%, what is the cost of
equity using the Capital Asset Pricing Model?
Using your Capital Asset Pricing Model cost of equity, to
the nearest .1%, what is Strolling's Weighted Average Cost of
Capital?
_______________________