单选题
An analyst gathers the following data about a company: Target capital structure of 10% preferred stock,50% common equity, and 40% debt. Outstanding 20-year, annual-pay,6% coupon bonds selling for $ 894. Common stock selling for $ 50 per share is expected to pay a $ 2 dividend that grows at 8%. The company's 5% , $100 par preferred stock currently sells for $90. The company's tax rate is 40%. The after-tax cost of debt and the cost of common equity are closest to: Cost of debt Cost of equity ①A. 4.2% 9.0%
②B. 4.2% 12.0%
③C. 5.1% 9.0%
A.① B.② C.③
【正确答案】
B
【答案解析】 N=20; FV=IO00; PV=-894; PMT=60; CPT→I/Y=7%
kd=7%×(1-0.4)=4.2% Cost of common
equity: $2/50+0.08=12.0%