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please help thank you!! Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $5,000,000 last year. From those earnings, the
please help thank you!!
Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $5,000,000 last year. From those earnings, the company paid a dividend of $1.23 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 45% debt, 25% preferred stock, and 30% common stock. It is taxed at a rate of 22% a. If the market price of the common stock is $33 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $5 per share, what is the company's cost of new common stock financing? c. The company can issue $1.58 dividend preferred stock for a market price of $31 per share. Flotation costs would amount to 56 per share, What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 8% coupon, 7-year bonds that can be sold for $1,170 each. Flotation costs would amount to $20 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing? e. What is the WACC? a. If the market price of the common stock is $33 and dividends are expected to grow at a rate of 9% per year for the foreseeable future, the company's cost of retained earnings financing is % (Round to two decimal places.) b. If underpricing and flotation costs on new shares of common stock amount to $5 per share, the company's cost of new common stock financing is % (Round to two decimal places.) C. If the company can issue $1.58 dividend preferred stock for a market price of $31 per share, and flotation costs would amount to $6 per share, the cost of preferred stock financing is % (Round to two decimal places.) d. If the company can issue $1,000-par-value, 8% coupon, 7-year bonds that can be sold for $1,170 each, and flotation costs would amount to $20 per bond, using the estimation formula, the approximate after-tax cost of debt financing is %. (Round to two decimal places.) e. Using the cost of retained earnings, r, the firm's WACC, T, is []%. (Round to two decimdi places.) Using the cost of new common stock, Pn, the firm's WACC, , is %. (Round to two decimal places.) Step by Step Solution
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