Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

show all the steps and formullas clearly with a handwritten answer please. Thanks QUESTION 2. (15 MARKS) RWQ Company has 50,000 bonds outstanding. The bonds

show all the steps and formullas clearly with a handwritten answer please. Thanks image text in transcribed
QUESTION 2. (15 MARKS) RWQ Company has 50,000 bonds outstanding. The bonds are selling 92% of face value, ($1,000) have a 6% coupon rate, pay interest semi-annually. There are 100.000 shares of $550 (divided) preferred sock outstanding with a current market price of 565 a share. In addition, there are 1.30 million shares of common stock outstanding with market price of $84 a share and a beta of 0.25. The common stock jupt paid $4.36 in dividends and it is expected to prow by 4% annually. The firm's marginal tax rate is 30%. The stock market risk premium is 95 and the Treasury bill rute % 1 What is the cost of equity-based on the dividend growth model 2 marks) 2. What is the cost of equity-based on the security market line? Explain any difference with (1) marks) 3 What is the cost of financing using preferred stock marks) 4 What is the thertax cost of debt financing (2 marks) 5. What is the weighted average cost of capital, using the cost of equity-based Interpret your answer marks) 6. Assume the company requires 54,000,000 to fund a new project. What amount must the company ise, if flocation costs are for det, for common equity, and for preferred equiry marks) QUESTION 2. (15 MARKS) RWQ Company has 50,000 bonds outstanding. The bonds are selling 92% of face value, ($1,000) have a 6% coupon rate, pay interest semi-annually. There are 100.000 shares of $550 (divided) preferred sock outstanding with a current market price of 565 a share. In addition, there are 1.30 million shares of common stock outstanding with market price of $84 a share and a beta of 0.25. The common stock jupt paid $4.36 in dividends and it is expected to prow by 4% annually. The firm's marginal tax rate is 30%. The stock market risk premium is 95 and the Treasury bill rute % 1 What is the cost of equity-based on the dividend growth model 2 marks) 2. What is the cost of equity-based on the security market line? Explain any difference with (1) marks) 3 What is the cost of financing using preferred stock marks) 4 What is the thertax cost of debt financing (2 marks) 5. What is the weighted average cost of capital, using the cost of equity-based Interpret your answer marks) 6. Assume the company requires 54,000,000 to fund a new project. What amount must the company ise, if flocation costs are for det, for common equity, and for preferred equiry marks)

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_2

Step: 3

blur-text-image_3

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

Personal Finance An Integrated Planning Approach

Authors: Ralph R Frasca

8th edition

136063039, 978-0136063032

More Books

Students also viewed these Finance questions

Question

]. Who was Y ou in the P hrase win as much as Y ou can?

Answered: 1 week ago