Individual or component costs of capital

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Reference no: EM131016001

Individual or component costs of capital) compute the cost of capital for the firm for the following:

a. A bond that has a $1,000 par value (Face value) and a contract or coupon interest rate of 10.3 percent. Interest payments are $51.50 and are paid semi-annually. The bonds have a current market value of $1,129 and will mature in 10 years. The firm's marginal tax rate is 34 percent.

b. A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 6.2 percent per year, forever. The price of the firm's common stock is now $27.22.

c. A preferred stock that sells for $130, pays a dividend of 8.7 percent, and has a $100 par value.

d. bond selling to yield 12.8 percent where the firm's tax rate is 34 percent.

The after-tax cost of debt is ___%. (Round to two decimal places.)

Reference no: EM131016001

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