What is the before-tax cost of debt and what is the


Hoosier Manufacturing (HM) has 15,000 bonds outstanding with a 7.30%/year coupon rate (with semi-annual coupon payments) and 9 years left to maturity. The bonds sell for $960.45 per bond. HM's common stock has a beta of 1.2. The 10-year Treasury-Bond rate is currently 1.9%, and historically, the market has earned 7% more per year than the 10-year Treasury rate. HM has 100,000 shares of common stock outstanding at a market price of $307.91/share (and a book value of $225.00/sh.). The appropriate marginal tax rate is 35%. a. What is the before-tax cost of debt and what is the after-tax cost of debt? b. What is the cost of common stock? c. What is the weighted average cost of capital for Hoosier Manufacturing?

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Financial Management: What is the before-tax cost of debt and what is the
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