Shy Shoes Ltd. has a bond outstanding with 7 yrs of maturitycoupon 5.55% Face value of $1000 market price of $920. It alsohas 6.2% Preferred Stock outstanding which trades at $95.21. ItsBETA is estimated as 1.35. Long-Term (10 yrs) US Treasury bondsyield 4.42%. Please assume an equity risk premium of 6% and amarginal corporate tax rate of 35%. Assume a target debt ratio of50%. What is the cost of capital for Shy Shoes Ltd?
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