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Hatch Corporation's target capital structure is 4 0 % debt, 5 0 % common stock, and 1 0 % preferred stock. Information regarding the company's
Hatch Corporation's target capital structure is debt, common stock, and preferred stock. Information regarding the company's cost of capital can be summarized as follows:
Long term debt is the only permanent debt financing. Hatch has year bonds which closed at $ paying an annual coupon rate of semi annual payments
par value of $
Preferred stock is priced at $ per share and pays $ per share annually. Flotation cost $ per share
Common stock sells for $ per shareand will pay a dividend during the coming year of $ Growth is estimated at
The marginal tax rate is
Optimal capital structure is debt and common equity and preferred stock.
a Find the cost of debt and preferred stock.
b Find the cost of retained earnings Use the DCF model for the cost of retained earnings
c Calculate the weighted average cost of capital.
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