As the Financial vice president for Bear Enterprises, you have the following inf

Question

As the Financial vice president for Bear Enterprises, you have the following information: Expected net income after tax next year before new financing : $60,000,000 Sinking Fund payments due next year on existing debt: $20,000,000 Interest due next year on existing debt $18,000,000 Conpany Tax rate 25% Common Stock Price, per share $17 Common Shares outstanding: 22,000,000 For next year assume the firm raises $60 Million of new debt at an interest rate of 9 percent. Calculate Bear's Interest Rate Answer a. 23.4% b. 2.34% c. .0234% d. 13.4%

Explanation / Answer

Bear's Interest Rate =WACC = 9%*Vd+ 6%*Ve =2.34%

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