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Question 5: Compute the cost of capital for the firm for the following: A bond that has a $1,000 par value (face value). And a
Question 5: Compute the cost of capital for the firm for the following:
- A bond that has a $1,000 par value (face value). And a contract or coupon interest rate of 11%. Interest payments are $55 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firms marginal tax rate is 34%
- A new common stock issue that paid a $1.80 dividend last year. The firms dividends are expected to continue to grow at 7% per year, forever. The prince of the firms common stock is now $27.50.
- A preferred stock that sells for $125, pays a 9% dividend, and has $100 pay value.
- A bond selling to yield 12% where the firms tax rate is 34%
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