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
Q. 1. The 31st December 2009 trial balance of Anika Co. reported the following information. Dr. Cr. Allowance for Bad Debts........................... $1,300 During the year 201

A fixed cost is a cost which can't be easily identified or related to a cost per unit or activity of any kind for example a cost which remains constant when production of a service

Prepare a spreadsheet of an overhead budget for the company in Problem 5 on page 216 of the textbook. You have been running a construction company out of your home with your spouse

Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on t

H Bhd has a 75% holding in the ordinary shares of S Sdn Bhd and 40% in A Sdn Bhd. Shares in S were acquired  in 2006 when its retained earnings were RM120 million.  The shares in A

At the end of Ehlinger Department Store's fiscal year on December 31, 2012, these accounts appeared in its adjusted trial balance: Freight-In $ 7,200

1.    Provide at least three characteristics of a corporation (in your own words).   2.   The date on which a cash dividend becomes a binding legal obligation is known

The Cutting Department of the Rock Island Custom Cabinetry Corporation (a process costing production) had no work in process at the beginning of the period, 12,000 units were compl

Using  the  information below, list profit statements  for June and July using  (a) margin costing and (b) absorption costing. A company produces and sells 1 product only which

First in First Out or FIFO FIFO method is based upon the assumption such stock purchased first is issued first. Prices of stock purchased first are employed to determine the v