Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi please answer the following question. I would like to have the answer as quiqly as possible. Thank you. (E Case 6. Deacham Corp. wants

image text in transcribed

Hi please answer the following question. I would like to have the answer as quiqly as possible. Thank you.

image text in transcribed
(E Case 6. Deacham Corp. wants to issue bonds with a 19% coupon rate, a face value of $_l_,_0_00, and 11 years to maturity/beacham estimates that the bonds will sell for $1,050 and that otation costs will equal $20 per bond! Deacham Corp common stock currently sells for $28 per share. Deacham can sell additional shares by incurring otation costs 0 $4 per share. Deacham paid a dividend yesterday of $3.00 per share and expects the dividend to grow at a constant rate of 6% per year. Deacham 'a'l'so expectstohave' $25 million ofl'etain'ed earnings available for use in capital budgeting projects during the coming year. Deacham's capital structure is 30% debt and 70%'commou equity. Deacham's marginal tai rate is 34%. . f . Calculate the after-tax 9=dyt assuming Deacham's bonds are its only..__debt. (5 marks) b. Calculate the cost of retainediearnings. (5 marks) ' /c. Calculate the cost of new common stock. (3 marks) d. Calculate the weighted average cost of capital assuming Deacham's total capgallaudg'et is $50 million. (7 marks) (Total 20 marks)

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

Practical Financial Management

Authors: William R. Lasher

8th edition

1305637542, 978-1305887237, 1305887239, 978-1305637542

More Books

Students also viewed these Finance questions

Question

What is a Gantt chart and why is it important?

Answered: 1 week ago