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Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable growth to be 3% a year. It
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable growth to be 3% a year. It sold 100 20-year corporate bonds with a $10,000 par value and a 4% coupon rate at the market price of $10,200. The flotation cost is 2% of par value. The corporate income tax rate is 25% It issued 100,000 new preferred shares at $10.30/share. It promises a $0.60/share annual dividend. The flotation cost is $0.30/share. The company also issued 20,000 new common shares at $51/share. The flotation cost is $1/share. Its next dividend is $2.5/share. Before-tax cost of capital from bond After-tax cost of capital from bond (ra) = Cost of capital from preferred stock (rp) = Cost of capital from common stock (rn) = % The weighted average cost of capital is (ra) = %
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