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
Determine Opportunity Costs A company has material B in stock that originally cost Shs. 5000 for the 1000 Kshs in stores. The material is missing over from an old purchase ord

Using the chosen company from Bursa Malaysia, prepare a consolidated accounts assuming that the chosen company acquire Sure Cargo Behard at 80% of its ordinary shares. Given bel

M aterials mix variance :  It can be described as that portion of direct material usage variance which is the variation between the actual quantities of ingredients used in a mi

Sensitivity Analysis The only certain thing is that nothing is sure thing. Cost structures can be anticipated to vary over the time period. Management should vigilantly analyze

Consider as Illustration. Profit and loss account of TIL demonstrates, that, operations have given gross addition of Rs. 360 million to funds throughout the period. These funds sho


B REAK EVEN ANALYSIS Break even analysis is a broadly used technique to study cost-volume-profit relationship.  It can be explained as - 'a system for determination of that le

The Gladys Corporation buys office equipment costing $426,000 on May 12, 2013. In 2015, new and improved models of the equipment make it obsolete, and Gladys sells the old equipme

Accounting for Labour costs We will contain an overview of accounting for labour costs as: a) Gross Earnings It is illustrated as item A that appears like a credit i

XYZ Inc. plans to raise $5,000,000 external financing through issuing bonds, and is considering two options: regular bonds and zero couple bonds.  The regular bonds will have coupo