Calculate its weighted average cost of capital

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Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in? this, compute the cost of capital for the firm for the? following:

a. A bond that has a ?1,000 par value? (face value) and a contract or coupon interest rate of 11.4 percent that is paid semiannually. The bond is currently selling for a price of ?1,130 and will mature in 10 years. The? firm's tax rate is 34 percent.

b. If the? firm's bonds are not frequently? traded, how would you go about determining a cost of debt for this? company?

c. A new common stock issue that paid a ?$1.76 dividend last year. The par value of the stock is ?$16?, and the? firm's dividends per share have grown at a rate of 7.4 percent per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now ?$27.25.

d. A preferred stock paying a 9.6 percent dividend on a ?$125 par value. The preferred shares are currently selling for $ 145.78

e. A bond selling to yield 12.2 percent for the purchaser of the bond. The borrowing firm faces a tax rate of 34 percent.

 

Reference no: EM131625132

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