Long-term debt: The firm can raise $450,000 of additional debt by selling! 15-year, $1,000-par-value, 9% coupon interest rate bonds that pay annual interest. It expects to net $960 per bond after flotation costs. Any debt in excess of $450,000 will have a before-tax cost, kd, of 13%. Preferred stock: Preferred stock, regardless of the amount sold, can be issued with a $70 par value and a 14% annual dividend rate and will net $65 per share after flotation costs. Common stock equity: The firm expects dividends and earnings per share to be $0.96 and $3.20, respectively, in 2007 and to continue to grow at a constant rate of 11% per year. The firm's stock currently sells for $12 per share. Star expects to have $1,500,000 of retained earnings available in the coming year. Once the retained earnings have been exhausted, the firm cn raise additional funds by selling new common stock, netting $9 per share after underpricing and flotation costs. 10 and Equity 100.000 $1,250,000 9-21. Puppet Mast has an optimal puppet Masters' opet Masters is consideri optimal capital structure Masters' debt is 10 percen new issue of preferred stock considering a new capital investment project. The company structure and plans to maintain it. The vield to maturity on 10 percent, and its tax rate is 35 percent. The market price of red stock is $25 per share, with an expected per share dividend of $2 at the end of this ommon stock has a current m in one year of $5. Flotatis Puppet Masters' divider expected to continue for 1 ance sheet follow: d of this year. Flotation costs are set at $1 current market price of $140 per share, with an expected dividend Flotation costs for issuing new common stock are $4 per share. e dividends are growing at 10 percent per year, and this growth is ntinue for the foreseeable future. Selected figures from last year's bal- Total Assets Long-Term Debt Preferred Stock Common Stock $1,000,000 300,000 100,000 600,000 Long-term debt: The firm can raise $450,000 of additional debt by selling! 15-year, $1,000-par-value, 9% coupon interest rate bonds that pay annual interest. It expects to net $960 per bond after flotation costs. Any debt in excess of $450,000 will have a before-tax cost, kd, of 13%. Preferred stock: Preferred stock, regardless of the amount sold, can be issued with a $70 par value and a 14% annual dividend rate and will net $65 per share after flotation costs. Common stock equity: The firm expects dividends and earnings per share to be $0.96 and $3.20, respectively, in 2007 and to continue to grow at a constant rate of 11% per year. The firm's stock currently sells for $12 per share. Star expects to have $1,500,000 of retained earnings available in the coming year. Once the retained earnings have been exhausted, the firm cn raise additional funds by selling new common stock, netting $9 per share after underpricing and flotation costs. 10 and Equity 100.000 $1,250,000 9-21. Puppet Mast has an optimal puppet Masters' opet Masters is consideri optimal capital structure Masters' debt is 10 percen new issue of preferred stock considering a new capital investment project. The company structure and plans to maintain it. The vield to maturity on 10 percent, and its tax rate is 35 percent. The market price of red stock is $25 per share, with an expected per share dividend of $2 at the end of this ommon stock has a current m in one year of $5. Flotatis Puppet Masters' divider expected to continue for 1 ance sheet follow: d of this year. Flotation costs are set at $1 current market price of $140 per share, with an expected dividend Flotation costs for issuing new common stock are $4 per share. e dividends are growing at 10 percent per year, and this growth is ntinue for the foreseeable future. Selected figures from last year's bal- Total Assets Long-Term Debt Preferred Stock Common Stock $1,000,000 300,000 100,000 600,000
