Jenkins Resources, Inc , has the following capital structure Financing Source Proportion of Capital Structure Debentures (9 coupon, $1,000 par value, 12 year maturity) 27 Preferred stock ($2 dividend, $25 par value) 8 Common equity 65 Total 100 Jenkins expects to raise future capital in the proport...

Investor required return on existing debt 1075 90PVIFA kd12 10 ...

Jenkins Resources, Inc., has the following capital structure: Financing Source Proportion of Capital Structure Debentures (9% coupon,

Question:

Jenkins Resources, Inc., has the following capital structure:
Financing Source Proportion of Capital Structure
(9% coupon, $1,000 year maturity) .............. 27%
Preferred stock ($2 $25 .... 8
Common equity .............. 65
Total ................. ... 100%
Jenkins expects to raise future capital in the proportions currently indicated on the balance sheet. The current market price for Jenkins debentures is $1,075. If new debentures were sold, the issuance cost would be $20 per bond. The current market price for the preferred stock is $19. Issuance costs on new preferred stock would be $1 per share for a $25 issue. Issuance costs on new equity would be $2.50 per share. The current market price for Jenkins is $40. The stock pays a current (D0) of $3. This is expected to grow at an annual rate of 7 percent.
What is the weighted (marginal) for Jenkins Resources, assuming new capital is raised in the proportions shown here and that all new equity comes from the sale of new shares, new debt comes from the sale of debentures, and new preferred comes from the sale of preferred stock? The firm’s marginal tax rate is 40 percent.

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... 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 Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... 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,...