Reference no: EM13879297
The Ulwind Company
-a tax rate of 40%
-a bond outstanding with a coupon of 9% and a yield of 8%
-flotation cost of $2 on preferred stock and $2.50 on common stock
-common stock with a price of $52 per share
-Preferred stock with a price of $42 per share
-preferred dividends of $4
-this year common stock dividends, D, were $3.50
-Common dividends grow at a rate of 4% a year
At present Ulwind has capital consisting of: Bonds $1,500,000
Preferred Stock $2,500,000
Common Equity $8,000,000
Calculate Ulwind’s MCC (marginal cost of capital) assuming that (1) it wants to maintain its current capital structure and (2) it will have to issue new shares of both preferred and common stock.
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