Question
MBC Group Inc. is planning to introduce a new product to the market and it needs raise an amount of capital totaled $100,000. The company
MBC Group Inc. is planning to introduce a new product to the market and it needs raise an amount of capital totaled $100,000. The company can acquire its capital from different sources: * Borrow 20,000$ from the bank with an Interest rate of 10% * Issue preferred stocks for 10,000$, each preferred stock price is 110$ and pays a dividend of 10$ * Use 55,000$ from retained earnings, * Issue new common stocks for 15,000$ with a floatation cost of 12%. The common stock of MBC Group is currently trading for 135$, its expected dividend to be paid is 5$ and its earnings growth rate is 5%. Moreover its stock beta is 0.9, risk free in market is 5.5% and market risk premium is 6%. Also, the company is in the 40% tax bracket.
7. Based on the information provided, MBC groups weighted average cost of capital is closest to: *
A) 10.6%.
B) 9.03%.
C) 12.08%.
D) 15.0%.
E) None of the above
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