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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 similar credit
(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 8.19% while the borrowing firm's corporate tax rate is 30%. b. Ordinary shares for a firm that paid a $1.02 dividend last year. The dividends are expected to grow at a rate of 5.6% per year into the foreseeable future. The price of these shares is now $24.73. c. A bond that has a $1,000 face value and a coupon interest rate of 12.5% with interest paid semi-annually. A new issue would sell for $1,155 per bond and mature in 20 years. The firm's tax rate is 30%. d. A preference share paying a dividend of 6.1% on a $97 face value. If a new issue is offered, the shares would sell for $86.79 per share. ... a. The after-tax cost of debt debt for the firm is %. (Round to two decimal places.) b. The cost of ordinary shares for the firm is %. (Round to two decimal places.) c. The after-tax cost of debt for the firm is %. (Round to two decimal places.) d. The cost of preference shares for the firm is %. (Round to two decimal places.)
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