Compute the cost of capital for the firm

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Reference no: EM13951922

Compute the cost of capital for the firm for the following:

1) A bond that has a $1,000 par value and a coupon interest rate of 11.3% with interest paid simiannually. A new issue would sell for $1,148 per bond and mature in 20 years. The firm's tax rate is 34%

2) A preferred stock paying a dividened of 6.8% on a $104 par value. If a new issue is offered, the shares would sell for $86.55 per share.

Need formulas along with answer. I am confused on how to solve these.

Reference no: EM13951922

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