Discount service stations to several neighboring states

Reference no: EM131117817

INTERMEDIATE The Ewing Distribution Company is planning a $100 million expansion of its chain of discount service stations to several neighboring states. This expansion will be financed, in part, with debt issued with a coupon interest rate of 15 percent. The bonds have a 10-year maturity and a $1,000 face value, and they will be sold to net Ewing $990 after issue costs. Ewing ' s marginal tax rate is 40 percent. Preferred stock will cost Ewing 14 percent after taxes. Ewing ' s common stock pays a dividend of $2 per share. The current market price per share is $15, and new shares can be sold to net $14 per share. Ewing ' s dividends are expected to increase at an annual rate of 5 percent for the foreseeable future. Ewing expects to have $20 million of retained earnings available to finance the expansion. Ewing ' s target capital structure is as follows: Debt 20% Preferred stock 5 Common equity 75 Calculate the weighted cost of capital that is appropriate to use in evaluating this expansion program.

Reference no: EM131117817

Questions Cloud

Both dividends and transaction costs : Answer the following questions based on the following quotation. On October 1, 2007, S&P 500 closed at 1547 where the quotation of CALL options on S&P 500 was as follows. Those contracts expire in October 2007. (Each part is worth 10 points, 40 p..

Hundreds of airplanes destroyed : The official entrance came after the attack on Pearl Harbor by Japanese bombers on December 7, 1941. With approximately 2,400 dead, multiple ships and hundreds of airplanes destroyed, President Roosevelt asked Congress to go to war.

Industrial revolution or nationalism : Make the case that either the Industrial Revolution or nationalism was the most significant force in nineteenth-century world history. Consider the case for the other option, as well, by way of demonstrating why your choice was more significant.

Evaluated a number of tools in helping to find solutions : Your role is to prepare a professional report for the board of directors, demonstrating that you have evaluated a number of tools and methods in helping to find solutions to the issues identified in the scenario above.

Discount service stations to several neighboring states : INTERMEDIATE The Ewing Distribution Company is planning a $100 million expansion of its chain of discount service stations to several neighboring states. This expansion will be financed, in part, with debt issued with a coupon interest rate of 15 ..

University in the united states : When was the University of Pennsylvania founded and was it first official University in the United States?

Determines whether the boolean code is correct : Each switch should respond to a mouse-click on the switch. If the handle is down, flip it up. If the handle is up, flip it down. To track the current position of a handle, an invisible circle can be placed on the switch and used as a point of refe..

Law in the us congress : Outline and explain the basic steps in the process by which a bill becomes a law in the U.S. Congress

Describe perspective about the soviet rule : Take the perspective of a citizen of East Berlin after 1961. Describe your perspective about the Soviet rule, Western freedoms, and hope for the future.

User Account

All Pages