Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

HBM , Inc has the following capital structure: Assets $ 3 0 0 , 0 0 0 Debt $ 1 0 5 , 0 0

HBM, Inc has the following capital structure:
Assets $ 300,000 Debt $ 105,000
Preferred stock 45,000
Common stock 150,000
The common stock is currently selling for $14 a share, pays a cash dividend of $0.85 per share, and is growing annually at 4 percent. The preferred stock pays a $6 cash dividend and currently sells for $87 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket.
What is the after-tax cost of debt? Round your answer to two decimal places.
%
What is the cost of preferred stock? Round your answer to two decimal places.
%
What is the cost of common stock? Assume that the current $0.85 dividend grows by 4 percent during the year. Round your answer to two decimal places.
%
What is the firms weighted-average cost of capital? Round your answer to two decimal places.
%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance and Public Policy

Authors: Jonathan Gruber

4th edition

1429278455, 978-1429278454

More Books

Students also viewed these Finance questions