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Philly Flooring is looking to go public with an IPO. In order to raise funds so the company can expand beyond the Philadelphia area, they
Philly Flooring is looking to go public with an IPO. In order to raise funds so the company can
expand beyond the Philadelphia area, they will be issuing bonds and common stock. They have
hired a local financial consultant who will charge a fee or flotation cost for handling the IPO.
The flotation costs are of the suggested bond price and of the projected stock price.
Given the following and a corporate tax rate, calculate the cost of capital for each security
and in total for the IPO. Use the Dividend Growth Model for the stock.
Suggested Bond price $$ Face Value
Suggested Bond term years
Suggested Bond Coupon rate
Projected Stock Price $share
Projected Stock Dividend $ per share
Growth rate
kb
kcs
What would be the dividend if kcs equaled
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