Find the marginal cost of equity

Assignment Help Financial Management
Reference no: EM131891498

ABC would like to expand and have a capital structure of: 10 million preferred stock 30 million debt 60 million common equity ABC would like to expand, in order to do so they must issue new debt with a 12% coupon rate, $1,000 par value, that have 15 year maturities. The floatation costs are 2% per bond. Preferred stock will cost ABC 11% after taxes. ABC's common stock currently sells for $22 a share and next year will pay a quarterly dividend of $0.25 per share. If the stock dividends are expected to continue to grow at a rate of 4% per year for the foreseeable future. ABC's tax rate is 35%. Find the marginal cost of equity.

Reference no: EM131891498

Questions Cloud

What is the percentage realized rate of return : What is the percentage realized rate of return? Assume that interest payments are reinvested at the original YTM
Find year one net cash flow : Find year one net cash flow. Find year two net cash flow. Find year three net cash flow. Find year four net cash flow. Find year five net cash flow.
Find the marginal cost of preferred stock : ABC's common stock currently sells for $22 a share and next year will pay a quarterly dividend of $0.25 per share. Find the marginal cost of preferred stock.
Types of investments over the previous three decades : Suppose you gathered the following return data on these types of investments over the previous three decades:
Find the marginal cost of equity : ABC's tax rate is 35%. Find the marginal cost of equity.
Calculate weighted average cost of capital : ABC would like to expand and have a capital structure of. Calculate the weighted average cost of capital.
Estimate present value of tax benefits from depreciation : Estimate the present value of the tax benefits from depreciation.
Difference in percentage changes in prices of bond : If interest rates suddenly rise by 2 percentage points, what is the difference in percentage changes in prices of Bond A and Bond B?
Find the present value of the firm in dollars : Assuming a discount rate of 19%, find the present value (at Year 0) of the firm in dollars.

Reviews

Write a Review

Financial Management Questions & Answers

  Depth each term of strenght-weakness-opportunity-threat

Define in depth each term of the S.W.O.T (Strenght, weakness, opportunity, threat) Analysis and provide real world examples of each.(For the examples please use the company U.P.S if possible)

  The yen-denominated debt without moving its operations

Amco is a U.S. company that conducts major importing and exporting business in Japan, whereby all transactions are invoiced in dollars. It obtained debt in the United States at an interest rate of 10 percent per year. The long-term risk-free rate in ..

  Average real risk-free rate over this time period

What was the average real risk-free rate over this time period?

  What is the compounded annual rate implied

What is the compounded annual rate implied by this 20 percent rate charged for only two weeks.

  High degree of credibility in the global financial markets

Why do think that the U.S. Dollar has such high degree of credibility in the global financial markets?

  What arbitrage opportunities are open to the bank

A bank can borrow or lend at LIBOR. Suppose that the six-month rate is 5% and the nine-month rate is 6%. The rate that can be locked in for the period between six months and nine months using an FRA is 7%. What arbitrage opportunities are open to the..

  Firm short-term cash forecast

Ralph, treasurer for M and M Products, Inc., recently updated his firm’s short-term cash forecast only to discover that the firm will suffer a cash shortage of $15 million for a period of 30 days. One alternative is to liquidate a portion of his mark..

  Determining the gasoline price

(a) How many gallons would be sold per hour if the price is $2.45 per gallon? Answer: _________ (b) What must the gasoline price be in order to sell 1300 gallons per hour? Answer: $ _________

  Indifferent between the option and forward hedge

At what future spot rate do you think PCC may be indifferent between the option and forward hedge?

  Calculate and compare the monthly payment for each

Candice and Zack are planning to purchase a condo. Calculate and compare the monthly payment for each.

  What is the appropriate price for the firms stock

what is the appropriate price for the firms stock?

  The firms total capital budget

The sales forecast may be presented as. If the pro forma balance sheet indicates that the projected assets exceeds the projected liabilities and equity, The firm's total capital budget is the:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd