I need to do this homework assignment and I have no idea where to begin. Can you help me with it? I need to show my work as well to receive credit.

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I need to do this homework assignment and I have no idea where to begin. Can you help me with it? I need to show my work as well to receive credit.
Answered Same DayDec 20, 2021

Solution

Robert answered on Dec 20 2021
3 Votes
a. Kd = Yield (1 – T)
= 11% (1 – .34) = 11% (.66) = 7.26%
Ke = (D1/P0) + g
= ($1.50/$30.00) + 9.0% = 5.0% + 9.0% = 14.0%
Cost (aftertax) Weights Weighted Cost
Debt (Kd) ............................................ 7.26% 40% 2.90%
Common equity (Ke) (retained
earnings) ........................................
14.00
60
8.40
Weighted average cost of capital (Ka)
.......................................................
11.30%
.
Retained earnings
X
% of retained...
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