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St.Joe Trucking has sold an issue of $6 cumulative preferred stock to the public at a price of $60 per share. After issuance costs, St.Joe netted $57 per share. The company has a marginal tax rate of 40 percent.
a. Calculate the after-tax cost of this preferred stock offering assuming that this stock is perpetuity.
b. If the stock is callable in five years at $66 per share and investors expect it to be called at that time, what is the after-tax cost of this preferred stock offering? (Compute to the nearest whole percent).
If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine the maturity risk premium for the thirty-year bond over the ten-year bond.
Alpha Waffles need to expand & increase their market share by 40 percent in the next 2 years. They would need to improve their packaging & spend money on advertising.
The company estimates is after-tax cost of debt to be 7%, its cost of preferred stock to be 9%, the cost of retained earnings to be 14%, and the cost of new common stock to be 17%. What is the weighted average cost of capital for this project.
Osbourne Corporation has bonds on the market with 16.0 years to maturity, a YTM of 10.5 percent, and a current price of $943. The bonds make semiannual payments. What must the coupon rate be on the bonds?
An investment will pay you $58,000 in seven years. The appropriate discount rate is 10 percent compounded daily.
Suppose that a firm has following Income Statement. Use this information to estimate the business risk and the financial risk as measured by the degree of operating leverage.
The company's cost of capital is the cost of debt is 4.61, the cost of common equity is 5.23, and cost of preferred equity is 6.67. What is the company's weighted average cost of capital?
A newly issued corporate bond has twenty years to maturity. The bond has a coupon rate of 8 percent and pays interest semiannually. Also the bond is callable in six years at a call price equal to 115% of par value.
What is the flotation cost of equity for a firm that generates sufficient internal cash flows to cover the equity portion of any capital expenditure?
Phoenix Corporation requires $500,000 to finance its growth and it approached a venture capitalist company to fund its future growth in business.
what happens to the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes.
At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.
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