Question
22. Suppose Massey Ltd. just issued a dividend of $.68 per share on its common stock. The company paid dividends of $.40, $.45, $.52 and
22. Suppose Massey Ltd. just issued a dividend of $.68 per share on its common stock. The company paid dividends of $.40, $.45, $.52 and $.60 per share in the last four years. If the stock currently sells for $12, what is your best estimate of the companys cost of equity capital?
Jiminys Cricket Farm issued a 30-year, 9 percent annual coupon bond 8 years ago. The bond makes coupon payments semiannually. The par value of the bond is $1,000. The bond currently sells for 105 percent of its face value. The companys tax rate is 35 percent.
What is the pretax cost of debt?
What is the after-tax cost of debt?
Which is more relevant, the pretax or the after-tax cost of debt? Why?
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International financial management
Authors: Jeff Madura
9th Edition
978-0324593495, 324568207, 324568193, 032459349X, 9780324568202, 9780324568196, 978-0324593471
