The Ivanhoe Products Co.curren

The Ivanhoe Products Co.currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,423.92 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $14 per share. The preferred shares pay an annual dividend of $1.20. Ivanhoe also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 6 percent per year forever. If Ivanhoe is subject to a 10 percent marginal tax rate, then what is the firm’s weighted average cost of capital?

B.) Calculate the yield to maturity of the debt.

C.) Calculate the cost of preferred equity.

D.) Calculate the cost of common equity.

E.) What is the firm’s weighted average cost of capital?

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