# How can I solve this problem?

How can I solve this problem?Delta, Inc. has a stock price of \$50. In the fiscal year just ended, dividends were \$2.00. Earnings per share and dividends are expected to increase at an annual rate of 8 percent. The risk-free rate is 4 percent, the market risk premium is 6.4 percent and the beta on Delta’s stock is 1.25. Delta’s target capital structure is 40% debt and 60% common equity. Delta’s tax rate is 40 percent.New common stock can be sold to net \$40 per share after flotation costs. Delta can sell bonds that mature in 25 years with a par value of \$1,000 and an 8% coupon rate paid annually for \$960. Calculate the before-tax interest rate on new debt financing

Year Cashflow0-960180280380480580680780880980108011801280138014801580168017801880198020802180228023802480251080 YTM=8.387% Cost of debt

### Order the answer to view it

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

Posted in Uncategorized