Debt-common equity with no preferred stock

Assignment Help Financial Management

Reference no: EM131354548

Cost of Common Equity

Pearson Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 14.00%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM131354548

Questions Cloud

Forecasting risk is defined as the possibility : Forecasting risk is defined as the possibility that:

With respect to the state boards of accountancy : With respect to the State Boards of Accountancy that regulate the Accounting profession, the quasi-legislative function that those administrative agencies perform that mirrors the legislative function of our federal system is:?

Discretely-compounded-what is net present value of project : The Carrier Air Conditioning plant in Indiana has agreed not to move off shore and is considering an enhanced assembly line, to be installed this coming January 1, which will bring increased sales of $500,000 and costs of $250,000 at the end of 2017...

Forecasting risk is defined as the possibility : Forecasting risk is defined as the possibility that:

Debt-common equity with no preferred stock : Pearson Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Pearson's CFO estimates that the company's WACC is 14...

What is coach inc distribution strategy : What is Coach, Inc Distribution strategy? List the Channels of distribution. List the Distribution by each channel. Show plan of what percent share of distribution (for 3 years) will be contributed by each channel using a pie chart.

Receivables investment-what is leyton dso : Leyton Lumber Company has sales of $12 million per year, all on credit terms calling for payment within 30 days; and its accounts receivable are $3 million. Assume 365 days in year for your calculations. What would DSO be if all customers paid on tim..

Finances working capital with bank loans : Parramore Corp has $15 million of sales, $3 million of inventories, $2 million of receivables, and $2 million of payables. Its cost of goods sold is 65% of sales, and it finances working capital with bank loans at an 6% rate. What is Parramore's cash..

What is the ex post real interest rate : Loretta agrees to lend Ted $750,000 to buy computers for his consulting firm. They agree to a nominal interest rate of 9%. Both expect the inflation rate to be 3%. Calculate the expected real interest rate: If inflation turns out to be 4% over the li..

User Account

All Pages