Reference no: EM131014882
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 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds ghave a current market value of $1,130 and will mature in 10 years. The firm's marginal tax rate is 34 percent.
B. A new common stock issue that paid a $1.83 dividend last year. The firm's dividends are expected to continue to grow at 7.8 percent per year, forever. The price of the firm's common stock is now $27.67.
C. A preferred stock that sells for $153, pays a dividend of 9.3 percent, and has a $100 par value.
D. A bond selling to yield 12.7 percent where the firm's tax rate is 34 percent.
Questions
A. The after-tax cost of debt is... ? (Round to two decimal places)
B. The cost of common equity for the firm? (Percentage)
C. The cost of preferred equity? (Percentage)
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Compute the cost of capital for the firm
: Compute the cost of capital for the firm for the following: A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds ghave a current mark..
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