COST OF CAPITAL,FINANCIAL MANAGEMENT, Financial Management


cost of capital, Financial Management
The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional:
Debt 25%
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: 11/28/2012 4:48:28 AM | Location : Ghana







Related Discussions:- COST OF CAPITAL,FINANCIAL MANAGEMENT, Assignment Help, Ask Question on COST OF CAPITAL,FINANCIAL MANAGEMENT, Get Answer, Expert's Help, COST OF CAPITAL,FINANCIAL MANAGEMENT Discussions

Write discussion on COST OF CAPITAL,FINANCIAL MANAGEMENT
Your posts are moderated
Related Questions
Reasons for mergers and acquisitions The key reasons for mergers and acquisitions, is to maximise shareholder wealth otherwise it wouldn’t be worthwhile. R

The director of capital budgeting for a firm has recognized two mutually exclusive projects, A and B, with the following expected net cash flows:

Day Traders Day traders are basically the market markers. They create liquidity in the market by frequently buying and selling stocks throughout the day in the hope that the pr

Question 1 There are several elements which you can take into consideration, while budgeting a project. Describe these elements Question 2 Explain the different methods/source

Examine about the Risk-based auditing A risk based audit will be reviewing the risk management process and considering main risks of the organisation as a whole. Risk manage

Do you guys provide Trend Analysis assignment help? I need writing a report on Trend Analysis and it is about 2000 words. Let me know. I need to buy your solution.


These types of securities have more than one coupon rate and each subsequent coupon rate is higher (or lower) than the previous coupon rate. For

It is true that company monetary statements will often consist of narrative information about staff as a key resource. However, under accounting regulation this resource is not sho

Q. Consequence of the cash operating cycle? The cash operating cycle is the length of time among paying trade payables and receiving cash from receivables. It is able to be cal