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please show work so i can study please Lexington Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is
please show work so i can study please
Lexington Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments: Debt: Capital can be raised through bank loans at a pretax cost of 7.1%. Also, bonds can be issued at a pretax cost of 5.9%. Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $92. Flotation costs will be $2 per share. The recent common stock dividend was $7.15. Dividends are expected to grow at 5% in the future. What is the cost of capital if the firm uses bank loans and retained earnings? SET YOUR CALCULATOR TO 4 DECIMAL PLACES. PLEASE INPUT THE ANSWER IN PERCENT ROUNDING IT TO 2 DECIMALS AT THE END. DO NOT INCLUDE % SIGN, E.G., INSTEAD OF 9.9922%, FOR EXAMPLE, ENTER 9.99 Step by Step Solution
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