Old MathJax webview

steinway instrument co.has 3000 bonds

Moving to the next question prevents changes to this answer. Question 4 20 points Question 4 Steinway instrument Co. has 3,000 bonds outstanding that are selling at 98 percent of par value. Bonds with similar characteristics have a yield to maturity of 7 percent. The company also has 28,000 shares of 5.5 percent preferred stock and 84,000 shares of common stock outstanding. The preferred stock sells for $60 a share. The preferred stock has a par value of $100. The common stock has a beta of 1.32 and sells for $88 a share. The risk-free rate is 2.3 percent and the return on the market is 9.8 percent. The corporate tax rate : 21 percent Required: A. Compute the following 1. After-tax cost of debt. (2 marks) 2 Cost of preferred stock. (3 marks) 3 Cost of equity. (5 marks) 4. Weighted average cost of capital. (6 marks) B. Explain TWO disadvantages of the dividend valuation model. (4 marks) TTT Ariel TE 3 (12pt] MacBook Air