Question
Can you please show your work :) thank you! Below is the balance sheet (book value) for JP Products Inc. (JPP). The preferred stock currently
Can you please show your work :) thank you!
Below is the balance sheet (book value) for JP Products Inc. (JPP). The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1,000 common shares and 100 preferred shares outstanding. Bonds are currently selling for $935.80.
Preferred shares pay a 7.5% dividend. The beta of the common stock is 1.5, the market risk premium is 7%, and the risk free rate is 4%. The companys tax rate is40% a) What is the JPPs cost of debt? b) What is JPPs cost of preferred shares? c) What is JPPs cost of common equity? d) What are the capital structure (weights) of JPP based on market values? (4 marks) e) What is JPPs weighted average cost of capital?
Liabilities and Owners Equity $10,000 Assets $1,000 Cash & short term Bonds, coupon =8%, paid semi-annually (maturity 10 years) Preferred stock (par value $20 per share) securities Accounts Receivable 3,000 2,000 7,000 21,000 $32,000 Common Stock 10,000 10,000 $32,000 Inventories Plant & equipment Retained earnings Total TotalStep by Step Solution
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