Question
Compute the cost for the following sources of financing : a.A $ 1,000 par value bond with a market price of $970 and a coupon
Compute the cost for the following sources of financing :
a.A $ 1,000 par value bond with a market price of $970 and a coupon intrest rate of 10 percent. Flotation costs for a new issue would be approximately 5 percent.The bonds mature in 10 years and the corporate tax rate is 34percent.
b.A prefered stock selling for $100 with an annual dividend payment of $8. If the company sells a new issue, the flotation cost will be $9 per share. The company's marginal tax rate is 30 percent.
c.Internally generated common stock totaling $4.8 million. The price of the common stock is $75 per share, and the dividend per share was $9.80 last year. The dividend is not expected to change in the future.
d.New common stock where the most recent dividend was 2.80. the company's devidend per share should continue to increase at an 8 percent growth rate into the indenfnite future. The market price of he stock currently $53; however, flotation costs of $ per share are expected if the new stock is issued.
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