Customer Service Chat
Get quote & make Payment
Cost of Capital, Financial Management
The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional:
Preferred Stock 15%
Common Equity 60%
NNBI''s expected net income this year is $34,285.72, its established dividend payout ratio is 30 percent, its tax rate is 40 percent, and investors expect earnings and dividends to grow at a constant rate of 9 percent in the future. NNBI paid a dividend of $3.60 per share last year, and its stock currently sells at per price of $60 per share.
NNBI can obtain new capital in the following ways:
Common: New common stock has a flotation cost of 10 percent.
Preferred: New preferred stock with a dividend of $11 can be sold to the public at a price of $100 per share. The flotation costs are $5 per share.
Debt:Debt can be sold at an interest rate of 12 percent.
assume that the cost of capital is constant beyond the retained earnings break point.
a. find the break point in the Marginal Cost of Capital.
b. Determine the cost of each capital structure component.
c. Calculate the weighted average cost of capital in the intervals between the break in the marginal cost of capital schedule.
Posted Date: 11/11/2012 11:04:40 AM | Location : Ghana
Ask an Expert
Cost of Capital, Assignment Help, Ask Question on Cost of Capital, Get Answer, Expert's Help, Cost of Capital Discussions
Write discussion on Cost of Capital
Your posts are moderated
Write your message here..
Calculate the new interest rate and excel function pv, I want to see the so...
I want to see the solution that was provided in Feb 2013 for Calculate the new interest rate and excel function pv, Financial Accounting
Illustrate the scope of financial management, Q. Illustrate the Scope of Fi...
Q. Illustrate the Scope of Financial Management? Financial management as an educational discipline has undergone notable changes over the years with regard to its scope of func
Define main trends which prevailed in international business, Discuss the t...
Discuss the three main trends which have prevailed in international business throughout the last two decades. The 1980s brought a fast integration of financial markets and inter
Example on cash flow diagram, (a) A usual cash flow diagram will incorporat...
(a) A usual cash flow diagram will incorporate the following. If you are short the CDO and then you receive a fixed amount at the initial point t o . After that you make paymen
Estimation of working capital, Q. Estimation of Working Capital? A firm...
Q. Estimation of Working Capital? A firm must estimate in advance as to how much net working capital will be required for the smooth operations of the business. Only then, it c
Management accounting and financial management, Q. Distinguish between Mana...
Q. Distinguish between Management Accounting and Financial Management with clear mention of basis of differences. How does the traditional financial manager differ from the mode
Explain speculator - market participants, Explain Speculator - Market Parti...
Explain Speculator - Market Participants A speculator attempts to profit from a modification in the futures price. For doing this, the speculator will take a long or short posi
State the term- pass through certificates, State the term- Pass Through Cer...
State the term- Pass Through Certificates (PTCs) Pass through Certificates (PTCs) are debt securities which pass through income from debtors through intermediaries to investors
Determine the key points in the turnbull report, Key points in the Turnbull...
Key points in the Turnbull Report: Have a defined process for review of effectiveness of internal control. Review regular reports on internal control. Consider key
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Follow Us |
T & C
Copyright by ExpertsMind IT Educational Pvt. Ltd.