Question
(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a$1,000 par value
(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 10.7percent. Interest payments are$53.50and are paid semiannually. The bonds have a current market value of$1,122and will mature in 10years. The firm's marginal tax rate is 34%
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 7.3 percent per year, forever. The price of the firm's common stock is now $27.17. percent, and has a $100 par value.
c. A preferred stock that sells for $142,pays a dividend of 8.1 percent.
d. A bond selling to yield 11.3 percent where the firm's tax rate is 34%
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