Debt: 35,000 bonds with a 5.0% coupon rate, payable annually, 15 years to maturity, selling at $1,050 per bond.
Common Stock: 504,000 shares of common stock outstanding. The stock sells for a price of $77 per share and has a beta of 0.63
Preferred Stock: 192,000 preferred shares outstanding currently trading at $72.90 per share; with an annual divided payment of $9.65
Market: The market risk premium is 17% and the risk free is 6%
Tax rate: 22%
What is the after tax cost of debt (Rd)?
a. -0.25%
b. 3.53%
c. 0.54%
d. 6.72%
e. 4.54%