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Honda is considering increasing production after unexpected strong demand for its new motorbike. To evaluate the proposal, the company needs to calculate its cost of
Honda is considering increasing production after unexpected strong demand for its new motorbike. To evaluate the proposal, the company needs to calculate its cost of capital. You've collected the following information:
The firm has one bond outstanding with a face value of $ a coupon rate of paid annually, years to maturity and a current price of $ The company incurs flotation costs of $ per bond.
The firm's preferred stock pays an annual dividend of $ forever, and each share is currently worth $ Issuing new preferred stock costs $ per share.
The current common stock price is $ The firm has just paid an annual dividend of $ which is expected to grow by per year. It costs $ per share to issue new common stock.
The firm has marginal tax rate of
The company wants to maintain is current capital structure, which is equity, preferred stock and debt. What is the beforetax cost of debt? What is the cost of preferred stock? What is the cost of equity from retained earnings? What is the cost of equity with flotation costs? What is the company's weighted average cost of capital if the company can use its retained earnings to finance its investments?
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