Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer all! (this is all part of one question) A firm has determined its optimal capital structure, which is composed of the following soubles

please answer all! (this is all part of one question) image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
A firm has determined its optimal capital structure, which is composed of the following soubles and target market value proportions: DEBT: The firm has 9.5 percent coupon, $1,000 par value bonds outstanding that are currently selling for $1,067. They will mature in 10 years DEBT: The firm has 9.5 percent coupon, $1,000 par value bonds outstanding that are currently selling for $1,067. They will mature in 10 years. PREFERRED STOCK: The firm has determined that it can issue preferred stock at $100 per share. The stock will pay a $12.00 annual dividend. The cost of issuing and selling the preferred stock is $3 per shale. COMMON STOCK: A firm's common stock is currently selling for $55 per share. The last dividend paid was $5.50. Dividends have been growing at a constant rate of 4.5 percent. Flotation costs for common stock are $2.75 per share. Additionally, the firm has a marginal tax rate of 40 percent. The firm also expects to have $1,500,000 of rotained earnings available to reinvest in the comina vear. What is the firm's cost of a new issue of common stock? A. 14.95% B. 14.50% C. 15.03% D. 15.50% What is the firm's weighted average cost of capital up to the point when retained earnings are exhausted? A. 12.10% B. 12.43% C. 12.95% D. 14.95% What is the firm's cost of capital after all of the retained earnings have been exhausted? A. 12.10% B. 14.95% C. 12.95% D. 12.43% At what level of total new financing will the firm exhaust its retained earnings? A. $1,500,000 B. $900,000 C. $2,500,000 D. $600,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cryptoassets The Innovative Investors Guide To Bitcoin And Beyond

Authors: Chris Burniske ,Jack Tatar

1st Edition

1260026671, 126002668X, 9781260026672, 9781260026689

More Books

Students also viewed these Finance questions