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( Individual or component costs of capital ) Compute the cost of capital for the firm for the following: a . Currently bonds with a
Individual or component costs of capital Compute the cost of capital for the firm for the following:
a Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield percent while the borrowing firm's corporate tax rate is percent.
b Common stock for a firm that paid a $ dividend last year. The dividends are expected to grow at a rate of percent per year into the foreseeable future. The price of this stock is now $
c A bond that has a $ par value and a coupon interest rate of percent with interest paid semiannually. A new issue would sell for $ per bond and mature in years. The firm's tax rate is percent.
d A preferred stock paying a dividend of percent on a $ par value. If a new issue is offered, the shares would sell for $ per share.
a The aftertax cost of debt debt for the firm is
Round to two decimal places.
b The cost of common equity for the firm is
Round to two decimal places.
c The aftertax cost of debt for the firm is
Round to two decimal places.
d The cost of preferred stock for the firm is
Round to two decimal places.
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