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I WILL LIKE FOR FAST REPLY Niagara Inc. has 5,000,000 shares of common stock outstanding, 1,000,000 of preferred stock outstanding, and 200,000 bonds outstanding with
I WILL LIKE FOR FAST REPLY
Niagara Inc. has 5,000,000 shares of common stock outstanding, 1,000,000 of preferred stock outstanding, and 200,000 bonds outstanding with a par value of $1,000. The common stock currently sells for $25, and has a beta of 1.5. The preferred stock currently sells for $30 per share and pays $5 dividend. The bonds have 9% coupon rate and make semiannual coupon payments. The bonds have 25 years to maturity and currently are selling at $763.57. The risk-free rate is 5% and the expected return on the market is 12%. Niagara's tax rate is 40%. A. Estimate the cost of common stock. (3 marks) B. Estimate the cost of preferred stock. (3 marks) C. Estimate the after-tax cost of debt. (3 marks) D. Estimate the weighted average cost of capital for Niagara Inc. (4 marks) E. Niagara Inc. needs $8,000,000 to start a new project. Floatation costs for issuing new common stock - 12 percent, for new preferred stock - 8 percent, and for new debt - 4 percent. Assuming that Niagara Inc. maintains the same capital structure, how much does it need to raise Step by Step Solution
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