Question
3a. a business is raising money for a new project. It is looking for raise $40 million via bond. The planned bond has a 9.5%
3a. a business is raising money for a new project. It is looking for raise $40 million via bond. The planned bond has a 9.5% semi-annual coupon, $1000 par value, and a 18 years to maturity. After the fee paid to investment bank, the business will receive $965 for each bond.
What is the cost of debt for the new project?
3b. one year ago, the businesss earning report posted $9.5 EPS, and the business paid $3.6 dividend for each share. The ROE is 11%. Assume the retention ratio would stay the same for the next few years. What is the growth rate for the businesss common stock?
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