Question
A companys Balance Sheet (in millions) Assets Liabilities & Equity Current $120 Net Fixed $180 Bonds ($1000 Par) 130 Preferred stocks ($100 Par) 50 Total
A companys Balance Sheet (in millions)
Assets Liabilities & Equity
Current $120
Net Fixed $180 Bonds ($1000 Par) 130
Preferred stocks ($100 Par) 50
Total $200 Common Stock ($1 par) 20
Total $200
The company's bonds have 9 years to mature, pay 10% coupon rate semi-annually and comparable bonds' YTM is 11%.
The companys applicable tax rate is 40%.
The market price of common stock is $12.50 per share.
The common stock dividend has grown at a steady rate from $0.68 in December 2000 to $1.48 in December 2010. The same growth rate is expected to continue for long time in the future.
The floatation cost for new common stocks is 15%.
The market value of the preferred stock is $75 and it pays quarterly dividend of $1.75.
The floatation cost on issuing new preferred stock is 7%
Next year is 2011.
What is the cost of issuing new common stock?
What is the cost of issuing new preferred stock?
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Handbook Of Research Methods And Applications In Empirical Finance
Authors: Adrian R. Bell, Chris Brooks, Marcel Prokopczuk
1st Edition
1782540172, 978-1782540175
