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
for financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

are eploration costs of a mining industry regarded as an asset or expense or both?

A firm's fixed costs for 0 units of output and its average total cost of producing different output levels are summarized in the table below. Complete the table to find the fixed c

Imagine a world in which there are only two investment assets: Hasbro Inc. Stock (HAS) and McDonalds stock (MCD). The table below lists annual total returns (%) for each of the las

Considerations in Variance Investigation As already notice above, not all variances are investigated; this is only the material and meaningful as for cost control reasons vari

Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2011. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $

Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains twelve quarts of synthetic oil. To achie

Presented here is the basic financial information from the 2009 annual reports of Intel and Advanced Micro Devces (AMD), the two primary manufacturers of silicon chips for personal


Features of Effective Cost Center Framework During the establishing cost centers, an organization must consider the given points as: a) Clear definition about the cost cent