Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of 54,800,000 last year. From those earnings, the company paid a dividend of 51.19 on each of its 1,000,000 common shares outstanding The capital structure of the company includes 30% debt, 25% preferred stock, and 45% common stock. It is taxed at a rate of 23%. a. If the market price of the common stock is 549 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, what is the company's cost of b. If underpricing and flotation costs on new shares of common stock amount to S8 per share, what is the company's cost of new common stook financing? c. The company can issue $2.41 dividend preferred stock for a market price of $28 par share. Flotation costs would amount to $2 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 10% coupon, 5-year bonds that can be sold for $1,130 each. Flotation costs would amount to $20 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing? e. What is the WACC? a. If the market price of the common stock is 549 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, the company's cost of retained earnings financing is % (Round to two decimal places.) Enter your answer in the answer box and then click Check Answer 5 parts Clear All Check Answer remaining Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of 54,800,000 last year. From those earnings, the company paid a dividend of 51.19 on each of its 1,000,000 common shares outstanding The capital structure of the company includes 30% debt, 25% preferred stock, and 45% common stock. It is taxed at a rate of 23%. a. If the market price of the common stock is 549 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, what is the company's cost of b. If underpricing and flotation costs on new shares of common stock amount to S8 per share, what is the company's cost of new common stook financing? c. The company can issue $2.41 dividend preferred stock for a market price of $28 par share. Flotation costs would amount to $2 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 10% coupon, 5-year bonds that can be sold for $1,130 each. Flotation costs would amount to $20 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing? e. What is the WACC? a. If the market price of the common stock is 549 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, the company's cost of retained earnings financing is % (Round to two decimal places.) Enter your answer in the answer box and then click Check Answer 5 parts Clear All Check Answer remaining
