Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $6 and are currently
Question:
- Builtrite Auto has preferred stock shares outstanding that pay an annual dividend of $6 and are currently selling for $96 a share.What is the after-tax cost of preferred stock if the flotation cost for new shares is 5% and Builtrite is in the 34% marginal tax bracket?
4.82%
9.79%
6.58%
7.31%
2.Builtrite Furniture is considering sells bonds for a plant expansion. Currently, Builtrite believes that it could sell 15 year maturity, $1000 par value, 5 3/4% coupon bonds after flotation costs for $1015.If Builtrite is in the 34% marginal tax bracket, what is the after-tax cost for the bonds?
5.59%
3.69%
4.20%
6.35%
3.Builtrite's common stock is currently selling for $56 a share and the firm just paid an annual dividend of $2.20 per share.Management believes that dividends and earnings should grow at 9% annually. Based on this, and a marginal tax rate of 34%, what is the cost of common stock (also known as thecost of retained earnings)?
13.3%
9.71%
15.2%
14.7%
4.Builtrite's common stock is currently selling for $48 a share and the firm just paid an annual dividend of $2.80 per share.Management believes that dividends and earnings should grow at 8% annually.Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $48 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock?
13.4%
8.61%
14.6%
8.87%
5.Common stock is called a hybrid security because it takes on the attributes of both preferred stock and bonds.
True
False