Solution-Find the component costs of debt

Find the component costs of debt

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Reference no: EM131083681

Bogart Gaming Company (BGC) has the following capital structure, which it considers to be optimal: 25% debt, 15% preferred stock, and 60% common stock. BGC's tax rate is 40%, and its investors expect dividends to grow at a constant rate of 6% in the future. BGC paid a dividend of $3.70 last year (D0) on its common stock, and the stock is currently priced at $60 per share.

Debt can be sold at an interest rate of 9%.

New preferred stock could be sold to the public at a price of $100 per share with a dividend of $9, but flotation costs of $5 per share would be incurred.

Only retained earnings will raise any new common equity.

Find the component costs of debt, preferred stock, and common stock.
What is the Weighted Average Cost of Capital (WACC)?

Reference no: EM131083681

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Find the component costs of debt : Bogart Gaming Company (BGC) has the following capital structure, which it considers to be optimal: 25% debt, 15% preferred stock, and 60% common stock. BGC's tax rate is 40%, and its investors expect dividends to grow at a constant rate of 6% in..

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Find the component costs of debt

Reference no: EM131083681

Reference no: EM131083681

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