Individual or component costs of capital

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Reference no: EM13956296

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

a. A bond that has a $1000 par value (face value) and a contract or coupon interest rate of 11 percent. Interest payments are $55.00 and are paid semi annualy. The bonds have a current market value of $1125 and will mature in 10 years. The firm's marginal tax rate is 34 percent.

b. A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7 percent per year, forever. The price of the firm's common stock is now $27.50.

c. A preffered stock that sells for $125, pays a 9 percent dividend, and has a $100 par value.

d. A bond selling to yield 12 percent where the firm's tax rate is 34 percent.

Reference no: EM13956296

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