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Compute the cost of capital for each of the following sources of financing: a. A new common stock issue by a firm that paid a
Compute the cost of capital for each of the following sources of financing:
a. A new common stock issue by a firm that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7 percent per year forever. The price of the firm's common stock is now $30.00.
b. A preferred stock that sells for $125, pays a 10 percent annual dividend, and has a $100 par value.
c. A bond whose yield to maturity (based on the bond's market price) is 10 percent where the firm's tax rate is 34 percent.
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