Ink Inc. has decided that the capital it is raising will consist of 10% preferred stock, 50%

Question:

Ink Inc. has decided that the capital it is raising will consist of 10% preferred stock, 50% common stock, and 40% debt. Ink has outstanding 20 year annual, 6% coupon bonds selling for $894. The par value of the bonds is $1,000. Ink’s common stock sells for $50 per share and is expected to grow at 8% and expected to pay a $2 dividend next year. If Ink sells new common it must pay a $5 per share flotation fee. Ink’s preferred stock currently sells for $54, and its annual dividend is $5 per share. If Ink were to sell new preferred stock, it would pay $4 per share as flotation cost. Ink’s tax rate is 40%.

What is Ink’s?

1. After tax cost of debt capital?

2. Cost of preferred stock capital?

3. Cost common stock?

4. Cost of capital?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...