Calculate the specific cost of each each source of financing

Assignment Help Financial Management

Reference no: EM131531143

Please help on cost of capital

SD is financed with 40% preferred stock and 50% common stock equity( retained earnings, new common stock or both) the applical income tax rate is 40%

debt bonds can be sold for 980 a 10 year 1,000 par value bond paying annual interst at a 6% coupon rate a floatition cost of 2% of par value is required in addition to the discount of $20 per bond

Preferred stock preferred stock having a par vallue of 100 and an 8% annual dividend can be sold for $85, however the underwriters will be paid an additional fee of $2 per share.

common stock: the firms common stock is currently selling for $150 per share. the dividend expected to be paid at the end of comming year 2016 is $12. Its a dividend payment which have been approximately 60% of Earnings per-share in each of the past five years are shown 2015 $11.25 2014 $10.50 2013 $9.90 2012 $9.45 2011 $8.55

It is expected that to attract buyers new common stock must be underpriced $15 per share and the firm must also pay nine dollars per-share in flotation costs dividend payments Park suspected to continue at 60% of earnings

a) calculate the specific cost of each each source of financing assume that the required return of retained earnings is equal to that on the common stock?

b) if earning available to common shareholders are expected to be 7 million what is the break Point associated with the exhaustion of retained earnings?

c) determine the weighted average cost of capital between zero and the break Point calculated in part B?

d) determine the weighted average cost of capital just Beyond the breakpoint calculated in part B?

Reference no: EM131531143

Questions Cloud

Conditioning involves the environmental control of behavior : Operant conditioning involves the environmental control of behavior, as opposed to self-control.

Evaluate number of memory chips to implement each block : A 68000 memory map is divided into equal-sized pages for each of the block sizes of Q1 In each case indicate the number of blocks into which the 68000 memory.

What is the percentage change in the price of bond : what is the percentage change in the price of Bond Sam?

Role of aprn in policy support or lack of support : Describe of how the policy is intended for a specific population, program, or organization.Role of APRN in Policy Support or Lack of Support.

Calculate the specific cost of each each source of financing : calculate the specific cost of each each source of financing assume that the required return of retained earnings is equal to that on the common stock?

Decreasing or constant returns to scale : Suppose f(L; K) = K2 + LK + L1/2K1/2: Does this production function exhibit increasing, decreasing or constant returns to scale? Show your work.

Leadership style involves retention of authority : The laissez-faire leadership style involves retention of authority and responsibility by the leader.

Analysis of communication style preferences : Analysis of communication style preferences among interdisciplinary team members and with the critically-ill individual and family members.

Saving-investment diagram for a small open economy : If the world real interest rate is indicated by "C", what does the difference between values "H" and "D" measure?

User Account

All Pages