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Problem 9-2 (similar to) Question Help individual or components of capital Compute the cost of the following a. A bond that has $1,000 par value (ace value) and a contract or coupon interest rate of 7 percent. A new issue would have a flotation cost of 6 percent of the $1.110 mare hue The bonds mature in 11 years. The average area 30 percent and its marginal tax rate is 22 percent A new common stock issue that paid a $1.20 dividend last year. The per value of the stock is $15, and carings per share have grown at a rate of 8 percent per year. This growth rate is expected to continue to the foreseeable The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now $23, but 7 percent Rotation costs are anticipated c.Internal common equity when the current market price of the common stock is $51. The expected dividend this coming year should be $3.10. increasing thereater tannual growth rate of 8 percent. The corporation's tax rate is 22 percent d. A preferred sock paying a dividend of 11 percent on a $120 par value. If a new issue is offered, flotation costs will be 16 percent of the current price of 5178 A bondeling to yold 14 percentather fotition costs, but before adjusting for the marginal corporate tax rate of 22 percent. In other words, 14 percent is the rate the equates the net proceeds from the bond with the present value of the cash flow priopal and interest) a. What is the firm's ofter-tax cost of debt on the bond? 5.02% (Round to two decimal places) b. What is the cost of external common equity? 1.11% (Round to two decimal places) X Problem 9-2 (similar to) Question Help Individual or component costs of Compute the cost of the following A bond that has $1,000 per value face and a contract or coupon interest rate of 7 percent. A new se would have a fostation cost of 6 percent of the $1,110 market value. The bonds mature in 11 years. The 's average tax rate is 30 percent and his marginal tax reis 22 percent b. A common stock pod 31.20 dividend last year. The par value of the stock is $15, and carings per here have grown a rate of 8 percent per year. This growth rate is spected to continue into the forestiereThe company maintains a constant dividend-coming role of 30 percent. The price of this stock is now $23. but 7 percentations we cated c.Internal common equily when the current market price of the common stock is $51. The expected dividend this coming year should be 53.10, increasing thereafter an annual growth rate of 8 percent. The corporation's tax rate is 22 percent d. A preferred stock paying a dividend of 11 percent on a $120 par value. If a new is offered, Rotation cols wil be 16 percent of the current price of 5178 ..A bond telling to yield 14 percent har folation cos, but before using for the marginal corporate tax rate of 22 percent. In other words, 14 percent is the rate that gates the nel proceeds from the bond with the present value of the future cash fous principal and interest What is the firm's wax cost of debt on the bond? 5.00's [Round to be decimal pes) b. What is the cost of alcommon equity? 1.11% (Round to two decimal places)
