Question
101. Bobski Co.targeted proportion of equity financing of a firm that plans to issue 1 million shares of equity issue with a par value of
101. Bobski Co.targeted proportion of equity financing of a firm that plans to issue 1 million shares of equity issue with a par value of $0.01 and current stock market price $38/share. Bobski. Co. also plans to issue $15 million par value 5 year maturity bond with a coupon rate of 4% and yield to maturity of 9.1637% to finance its new capital projects, given the tax rate of 40%? (show work in excel)
102. You are hired to maintain a targeted debt to equity ratio of 1/4. The weighted average cost of capital seems to be 18.6% and the pre tax cost of debt is 9%, what would the cost of common equity be assuming a tax rate of 30%? (show work in excel)
105. Bobski has 50% common equity and required return of 15%, 35% debt with after tax cost of debt 8%, 15% preferred stock with a required return of 10%, and after tax rate of 35%, what is Bobski weighted average cost of capital? (show work in excel)
107. You decide to finance a new innovation system with issuance of 5 million, shares of 10 years and 4% coupon bond with yield to maturity of 6%, 10 million shared of preferred stock with dividend of 3$ and return of 10%, and 900 milion shares of common equity at the current price of $25 per share. If it's common has a beta of 1.25 and long term risk free rate is 3% and market risk premium is 6%. what is the weighted average cost of capital, assuming a tax rate of 40%. Do not consider Flotation cost. (show work in excel)
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