Individual or component costs of capital

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Reference no: EM131609669

?(Individual or component costs of capital?) Compute the costs for the following sources of? financing : (round to two decimals)

a. A$ 1000 par value bond with a market price of $ 945 and a coupon interest rate of 9 percent. Flotation costs for a new issue would be approximately 5 percent. The bonds mature in 8 years and the corporate tax rate is 35 percent.

b. A preferred stock selling for $ 109 with an annual dividend payment of $ 8 The flotation cost will be $ 7 per share. The? company's marginal tax rate is 30 percent.

c. Retained earnings totaling $ 4.8 million. The price of the common stock is $ 76 per? share, and dividend per share was $ 9.87 last year. The dividend is not expected to change in the future.

d. New common stock for which the most recent dividend was $ 3.07.The? company's dividends per share should continue to increase at a growth rate of 8 percent into the indefinite future. The market price of the stock is currently $ 64; however, flotation costs of $7 per share are expected if the new stock is issued.

Reference no: EM131609669

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