cost of capital, Financial Management

Assignment Help:
AThe Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional:
Debt 25%
Preferred Stock 15%
Common Equity 60%

NNBI''''s expected net income this year is $34,285.72, its established dividend payout ratio is 30 percent, its tax rate is 40 percent, and investors expect earnings and dividends to grow at a constant rate of 9 percent in the future. NNBI paid a dividend of $3.60 per share last year, and its stock currently sells at per price of $60 per share.
NNBI can obtain new capital in the following ways:
Common: New common stock has a flotation cost of 10 percent.
Preferred: New preferred stock with a dividend of $11 can be sold to the public at a price of $100 per share. The flotation costs are $5 per share.
Debt:Debt can be sold at an interest rate of 12 percent.
assume that the cost of capital is constant beyond the retained earnings break point.
a. find the break point in the Marginal Cost of Capital.
b. Determine the cost of each capital structure component.
c. Calculate the weighted average cost of capital in the intervals between the break in the marginal cost of capital schedule.sk question #Minimum 100 words accepted#

Related Discussions:- cost of capital

Securities and exchange commission of usa, SECURITIES AND EXCHANGE COMMISSI...

SECURITIES AND EXCHANGE COMMISSION OF USA In the United States, securities industry is regulated by the United States Securities and Exchange Commission (SEC). It is the govern

Viability of project - syringe management, The syringe management program t...

The syringe management program tries to educate society by increasing the capacity and quantity of the syringe disposable centers , providing timely responses to all syringe compla

Type of assets, type of assets for ppt from t.y.bom com student in commerce...

type of assets for ppt from t.y.bom com student in commerce department in financial management

Explain the term dividend cover, Dividend cover Dividend cover measure...

Dividend cover Dividend cover measures the relationship among earnings per share and net dividends per share. The higher the altitude of dividends for any given level of EPS t

Define supply curve for a good is totally inelastic, Suppose the supply cur...

Suppose the supply curve for a good is totally inelastic.  If the government imposed a price ceiling below the market-clearing level, would a deadweight loss result?  Explain.

Explain about the audit risk, Audit risk Obtain understanding of ac...

Audit risk Obtain understanding of accounting and internal control systems. Sufficient to plan audit and develop effective audit approach. Professional judgement to

Valuation models, V aluation Models A valuation model defines the e...

V aluation Models A valuation model defines the exercise of applying financial and economic principles to estimate the value of an asset. Discounted cash flow valuation mod

Advantage to corporation of investing in working capital, What is the prima...

What is the primary advantage to a corporation of investing some of its funds in working capital?  By investing in working capital a firm acquires the liquidity it needs helpin

What is the deferred tax asset or liability at the end yr, AB Corp expensed...

AB Corp expensed on the financial stmt $2,000,000 for depreciation expense during the year using straight line depreciation and deducted $3,000,000 of depreciation on the tax retur

Venn diagram, d iscuss the relationship between finance management,economic...

d iscuss the relationship between finance management,economics,accounting, and mathematics. illustrate/show through a venn diagram

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd