1. Given the following information about ABC corporation: Security Book Value Amount ($ millions) Common Stock...
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1. Given the following information about ABC corporation: Security Book Value Amount ($ millions) Common Stock Preferred Stock Bonds Retained Earnings Total 10 5 2 22 The common stock is currently trading at $10/share and there are 1 million shares outstanding. The firm has a Beta of 1.2, the economy's risk-free rate is 2% and the equity market premium is 4%. ABC's preferred stock is trading at $12/share and there are also 1 million shares outstanding. The par value of the preferred stock is $5 and it has a dividend yield of 20%. A series of 500,000 bonds were issued with a face value of $1,000. These bonds are now currently selling at $960 each. The bonds have a 10-year maturity and a coupon rate of 10% paid semi-annually. The firm's corporate tax rate is 30%. What is ABC's cost of capital? 1. Given the following information about ABC corporation: Security Book Value Amount ($ millions) Common Stock Preferred Stock Bonds Retained Earnings Total 10 5 2 22 The common stock is currently trading at $10/share and there are 1 million shares outstanding. The firm has a Beta of 1.2, the economy's risk-free rate is 2% and the equity market premium is 4%. ABC's preferred stock is trading at $12/share and there are also 1 million shares outstanding. The par value of the preferred stock is $5 and it has a dividend yield of 20%. A series of 500,000 bonds were issued with a face value of $1,000. These bonds are now currently selling at $960 each. The bonds have a 10-year maturity and a coupon rate of 10% paid semi-annually. The firm's corporate tax rate is 30%. What is ABC's cost of capital?
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We can calculate ABCs cost of capital by finding the individual costs of each capital source debt preferred stock common equity and then finding the w... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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