Question
Compute the cost of capital for the firm for the following: a.Currently bonds with a similar credit rating and maturity as the firm's outstanding debt
Compute the cost of capital for the firm for the following:
a.Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 8.25 percent while the borrowing firm's corporate tax rate is 34 percent.
b.Common stock for a firm that paid a $1.04 dividend last year. The dividends are expected to grow at a rate of 5.3 percent per year into the foreseeable future. The price of this stock is now $24.77
c.A bond that has a $1000 par value and a coupon interest rate of 12.1 percent with interest paid semiannually. A new issue would sell for $1154 per bond and mature in 20 years. The firm's tax rate is 34 percent.
d.A preferred stock paying a dividend of 7.2 percent on a $94 par value. If a new issue is offered, the shares would sell for $85.12 per share.
a.The after-tax cost of debt debt for the firm is __%. (Round to two decimal places.) b.The cost of common equity for the firm is __%. (Round to two decimal places.) c.The after-tax cost of debt for the firm is __%. (Round to two decimal places.) d.The cost of preferred stock for the firm is __%. (Round to two decimal places.)
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