B9. (Estimating the WACC) Fuerst Cola has 10,000 bonds and 400,000 shares outstanding. The bonds

B9. (Estimating the WACC) Fuerst Cola has 10,000 bonds and 400,000 shares outstanding. The bonds

Corporate Financial Management (3rd Edition): Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)

B9. (Estimating the WACC) Fuerst Cola has 10,000 bonds and 400,000 shares outstanding. The bonds have a 10% annual coupon, $1,000 face value, $1,050 market value, and 10-year maturity. The beta on the stock is 1.30 and its price per share is $40. The riskless return is 6%, the expected market return is 14%, and Fuerst Cola’s tax rate is 40%.

What is the after-tax cost of debt financing?

What is the after-tax cost of equity financing?

What is the WACC?  SOLUTION