What is the interest rate of new common stock issue

Assignment Help Financial Management

Reference no: EM131507343

Assume that All Concrete Construction Inc. has established a target capital structure of 40 percent debt and 60 percent common equity. The firm expects to earn $3,700,000 in after-tax income during the coming year, and it will retain 70 percent of those earnings. The current market price of the firm's stock is $52; its last dividend was $0.72, and its expected growth rate is 5.6 percent. All Concrete can issue new common stock at an 8 percent flotation cost.

a. What is the interest rate (cost) of retained earnings?

b. What is the interest rate (cost) of a new common stock issue?

c. What is the maximum capital budget that All Concrete can support with retained earnings?

d. Given a $4,500,000 budget, what will be All Concrete’s marginal cost (interest rate) on common equity?

Reference no: EM131507343

Questions Cloud

Parameters of demand and supply functions : Derive equilibrium quantity and price as functions of the parameters of demand and supply functions. Show your work.

What impact do the compensation and benefit package : When you have chosen to apply for a position, what impact do the compensation and benefit package have on your decision?

List two advantages of noncompensatory models : As a recent college graduate you are ready for the same thing every recent graduate is ready for-a new car! You know this is a big decision.

How and why is demand for services important in healthcare : How and why is demand for services important in healthcare? What are the macro and microeconomic factors that have an impact on supply and demand?

What is the interest rate of new common stock issue : What is the interest rate (cost) of retained earnings? What is the interest rate (cost) of a new common stock issue?

Identify five attributes with at least three nonmonetary : You have inherited a large sum of money from Aunt Bee. You think the purchase of a beach house would be a good investment.

Define the financial concept of leverage : Define the financial concept of leverage. Describe how leverage may work to the advantage of the LBO equity investor? How might it work against them?

Identifies specific rater errors and biases : Identifies specific Rater Errors and Biases when conducting performance appraisals. Do you feel that you've ever been victim to any of these during performance

Define the dominance and satisficing : Use the additive weighting technique to rank order the overall success of these five presidents: T. Jefferson, A. Lincoln, F.D. Roosevelt, R. Reagan.

User Account

All Pages