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(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000
(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.1 percent. Interest payments are $55.50 and are paid semiannually. The bonds have a current market value of $1,124 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.77 dividend last year. The firm's dividends are expected to continue to grow at 6.5 percent per year, forever. The price of the firm's common stock is now $27.87. c. A preferred stock that sells for $127, pays a dividend of 9.2 percent, and has a $100 par value. d. A bond selling to yield 11.5 percent where the firm's tax rate is 34 percent. ...
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