Cost of Capital - Aurora's Princess Jewelry
1. What is the after-tax cost of equity funding?
2. What is the after-tax cost of long-term debt?
3. What is the book value weights?
4. What is the marginal or market value weights?
5. What is the after-tax WACC at book value?
6. What is the after-tax WACC at market value?
Equity Information
50 million shares
Issued with $40 Par value
Sold at $40 per share, no excess
Market Price: $80 per share
D0 = $5.15
Growth Rate = 5.0%
Flotation Cost = 9.0%
Retained Earnings = $1 billion
Debt Information
$1 billion in outstanding debt
$1,000 face value per bond
Current quote = 110
Coupon rate = 9%, semiannual coupons
15 years to maturity
Flotation Cost = 2%
Tax rate = 21%