Individual or component costs of capital

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Reference no: EM13850724

(Individual or component costs of capital) Compute the cost of capital for the firm for the following:

A. A new common stock issue that paid a $1.85 dividend last year. The firm's dividends are expected to continue to grow at 7.7 percent per year, forever. The price of the firm's common stock is now $27.91. The cost of common equity is? %.

B. A preferred stock that sells for $131, pays a dividend of 9.2 percent, and has a $100 par value. The cost of preferred stock is? %.

C. A bond selling to yield 11.4 percent where the firm's tax rate is 34 percent. The after-tax cost of debt is? %.

Reference no: EM13850724

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