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The following information applies to the Coetzer Company:
Coetzer has 345,000 share of common stock outstanding at $50 a share. It also has bonds outstanding with a total face value of $10 million.
Coetzers has 10,000 bonds paying 12 percent semi annually with a 15-year maturity, and a current price of 115% for each bond.
Coetzers has 8,000 shares of 5.25 percent preferred stock outstanding, currently selling for $75 per share.
The risk-free rate is 5 percent. The market risk premium is also 5 percent.
Coetzers common stock has a beta of 1.4.
Coetzers tax rate is 40 percent.
1. What is the companys after-tax cost of debt?
2. What is the companys cost of preferred stock?
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