Samstreet, Inc went public by issuing 1 million shares of common stock at $25 per share. The shares are currently trading at $30 per share.
Samstreet, Inc went public by issuing 1 million shares of common stock at $25 per share. The shares are currently trading at $30 per share. Current risk free rate is 4%, market risk premium is 8% an the company has a beta coefficient of 1.2. During last year, it issued 50,000 bonds of $1,000 par paying 10% coupon semi-annually maturing in 20years. The bonds are currently trading at $950. Flotation cost on new bonds are 2%. Samstreet also has 200,000 shares of preferred stock, which pay a dividend of $2 per share and sell for $100 per share. the cost of issuing a new preferred share is 4%. The tax rate is 30%.
calculate the after tax cost of debt
calculate cost of equity
cost of preferred shares
calculate WACC
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Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
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