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Armani is a firm manufacturing perfumes and other cosmetics and it sells its products worldwide

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Armani is a firm manufacturing perfumes and other cosmetics and it sells its products worldwide . you are provided the following information - - The long - term treasury bond rate is 8 % . The market return is 6.5 % There are 10 million shares outstanding , trading at $ 44 per share currently the stock has been traded for only lwo years . A regression of stock returns against market returns yields a beta of 0.7 with a standard error of 0.9 The debt on the balance sheet has two components . The first is traded bonds , with eight years to expiration and a coupon rate of 8 % ; there are 50,000 bonds outstanding , trading at 800 apiece ( the face value is $ 1000 ) . The second is $ 50 million in bank debt which also has a ten year maturity , and carries an interest rate of 7 % . With a market value of million $36.5 the marginal tax rate is 44 % a . Estimate the cost of equity for Armani Inc. b . Estimate the market value of debt and the after - tax cost of debt for Armani Inc. c . Estimate the cost of capital for this firm using the market value weights hint : you can use the approximate formula for estimating the cost of debt