Question
(Individual or component costs of capital ) Compute the cost of capital for the firm for the following: (A) A bond that has a $1,0(30par
(Individual or component costs of capital ) Compute the cost of capital for the firm for the following: (A) A bond that has a $1,0(30par value(face value) and a contract or coupon interest rate of 11 percent interest payments are $55.0 and are paid semiannually. The bonds have a current market value of $ 1125 and will mature in 10 years. The firm's marginal lax rate is 34 percent. (B) A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7 percent per year, forever. The price of the firm's common stock is now $27.50 (C) A preferred stock that sells for $125, pays a 9 percent dividend, and has a $100 par value (D) A bond selling to yield 12 percent where the firm's tax rate is 34 percent
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