Individual or component costs of capital

Assignment Help Financial Management

Reference no: EM131844066

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

a. A $ 1,000 par value bond with a market price of $ 960 and a coupon interest rate of 7 percent. Flotation costs for a new issue would be approximately 8 percent. The bonds mature in 14 years and the corporate tax rate is 36 percent.

b. A preferred stock selling for $ 106 with an annual dividend payment of $ 7. The flotation cost will be $ 9 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 $ 74 per? share, and dividend per share was $ 8.34 last year. The dividend is not expected to change in the future.

d. New common stock for which the most recent dividend was $ 2.65. 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 $ 51; however, flotation costs of $ 6 per share are expected if the new stock is issued.

a. What is the? firm's after-tax cost of debt on the? bond? ?% (Round to two decimal? places.)

b. What is the cost of capital for the preferred? stock? ?% (Round to two decimal? places.)

c. What is the cost of internal common? equity? ?% (Round to two decimal? places.)

d. What is the cost of external common? equity? ?% (Round to two decimal? places.)

Reference no: EM131844066

Questions Cloud

Write a career development plan for customer service manager : Career Management and Development is a complex topic involving an understanding of life stage (Erickson and Levinson Models), models of career development.

What is the company market capitalization : BrandCo currently has 50 million shares outstanding. what is the company’s market capitalization (value of equity)?

Bird-in-the-hand argument : Residual theory of dividends, "Bird-in-the-hand" argument, Informational content of dividends.

What is the annual demand-in terms of boxes : The Candy Shack has a monthly demand of 200 bags of Watermelon Slices. They pay $11.50 for each box of candy which contains 14 bags for sale.

Individual or component costs of capital : (Individual or component costs of capital?) Compute the costs for the following sources of? financing. What is the cost of capital for the preferred? stock?

Estimate the standard deviation of the process : Care was taken to operate a metal casting process so that no assignable causes in variation were introduced, and randomly selected castings were weighed.

What is the appropriate input mix to get the greatest output : car company's short-run production function is Q=10KL, where Q represents quantity of cars, K denotes capital input (units per hour).

Purchase of new smoker oven for cooking barbecue : Rib & Wings-R-Us is considering the purchase of new smoker oven for cooking barbecue, ribs, and wings. It is looking at two different ovens.

Lower boundary for the payoff value of the trading strategy : What is lower boundary for the payoff value of the trading strategy described above for any series of two equally spaced strikes Ki.

User Account

All Pages