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 comma 000 par
(Individual or component costs of capital)Compute the cost of capital for the firm for the following: a.A bond that has a $1 comma 000 par value (face value) and a contract or coupon interest rate of 11.3 percent. Interest payments are $56.50 and are paid semiannually. The bonds have a current market value of $1 comma 125 and will mature in 10 years. The firm's marginal tax rate is 34 percent. b.A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 7.7 percent per year, forever. The price of the firm's common stock is now $27.83. c.A preferred stock that sells for $124, pays a dividend of 8.8 percent, and has a $100 par value. d.A bond selling to yield 11.7 percent where the firm's tax rate is 34 percent. a.The after-tax cost of debt is nothing%. (Round to two decimal places.) b.The cost of common equity is nothing%. (Round to two decimal places.) c.The cost of preferred stock is nothing%. (Round to two decimal places.) d.The after-tax cost of debt is nothing%. (Round to two decimal places.)
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