AI Enterprises is a computer corporation and its present sources of funds are $5,000,000 in equity capital and $2,000,000 in preferred stock. The company wants to fund some of its future projects (estimated cost: $3,000,000) with long term debt. Its current cost of equity and preferred stock are 20.00% and 15.00% respectively. This current cost will not change after raising new debt from the market. The firm desires to keep its after-tax weighted cost of capital at 14.80% percent.The firm is at 40% corporate tax rate.
Find the annual coupon interest rate on its proposed long-term debt that will keep the after-tax weighted cost of capital (WACC) at the desired level is %.
Calculate the interest expense for the company each year $.