Question
Coumpute the cost of capital for the firm for the following: 1. Common stock for a firm that paid a $2.05 dividend last year. The
Coumpute the cost of capital for the firm for the following:
1. Common stock for a firm that paid a $2.05 dividend last year. The dividends are expected to grow at a rate of 5% per year into the foreseeable future. The price of the stock is now $25.
2. A bond that has a $1000 par value and a coupon interest rate of 12% with interest paid semiannually. A new issue would sell for $1,150 per bond and mature in 20 years. The firm's tax rate is 34%.
3. A preferred stock paying a 7% dividend on a $100 par value. If a new issue is offered, the shares would sell for $85 per share.
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