Determine the expected rate of growth of dividends, Cost Accounting

General Motors has to raise new capital in one of the following three ways. Using the income tax rate of 32%, find the after-tax cost of new capital in each case.

(A) Sell common stock at $33 a share, which will pay a dividend of $3 next year. The expected rate of growth of dividends is 6% per annum forever.

Answer: 15.09%

(B) It can sell 7% bonds at $850 per bond that will mature in 10 years. Include the original issue discount.

Answer: 6.439%

(C) By selling $11 preferred stock at $90 a share, redeemable at $100 after 5 years.

Answer: 13.91%

Posted Date: 3/8/2013 4:58:52 AM | Location : United States







Related Discussions:- Determine the expected rate of growth of dividends, Assignment Help, Ask Question on Determine the expected rate of growth of dividends, Get Answer, Expert's Help, Determine the expected rate of growth of dividends Discussions

Write discussion on Determine the expected rate of growth of dividends
Your posts are moderated
Related Questions

Superior Door Company sells pre-hung doors to home builders. The doors are sold for $60 each. Variable costs are $42 per door and fixed costs total $450,000 per year. The company i

Multiple Products, Selling Costs, and Margin Management Selling charge are oftentimes variable. For instance, a salesperson can be paid a designated percentage of entire sales

Using the table below, calculate the amount of overall increase of your purchasing power over the period of 5 years given the annual investment return rates and annual inflation ra

Calculate the equal monthly payments and the cost of financing on a 25-year mortgage. The cash value of the house today is $500,000. You are paying monthly at a fixed rate of 6% pe

i need help on my homework

The CFO of ABC Municipality has heard of activity based costing and wants to execute it in the municipality. Because ABC involves a number of changes to how service costs are deter

The next year's budget for Benny, Inc., is given below: Product 1 & 2 Sales $945,000 & 688500 Variable costs 459,900 & 297,000 Fixed costs 300

Good Food Company is a local manufacturer of instant noodles. Established in 2005, their business has been growing steadily. Their products, which are available in 3 flavors, are s

We've all experienced (or heard about) the challenges that the airlines have been facing. Read the Zacks Investment Research article, "Airline Industry Stock Outlook - August 2012"