Question
solve the following task below 6. A firm just announced a new preferred stock issue. The preferred dividend, which will be paid in perpetuity, is
solve the following task below
6. A firm just announced a new preferred stock issue. The preferred dividend, which will be paid in perpetuity, is expected to be $2. The return required by shareholders is 9.5%. What is the cost of preferred equity as a percent? (Round to the nearest hundredth.)_______
7. A company is planning to issue a new $1,000 face-value bond that will mature in 15 years. The bond will be priced at 101% of face value, and the annual coupon rate is 8%. Flotation costs are expected to sum to 3%. What is the before-tax cost of debt as a percent? (Round to the nearest hundredth.)__________________
8. Suppose a company is valued by the market at $60 million and is financed with both debt and equity. Currently, the company has a market value of equity of $10 million. The company also has a market value of short-term debt of $15 million and a market value of long-term debt of $35 million. The cost of equity is 17%, the cost of short-term debt is 9%, and the cost of long-term debt is 11%. If the marginal tax rate is 34%, what is the weighted-average cost of capital? (Round to the nearest hundredth.)_____________
9. Suppose a company is valued by the market at $100 million and is financed with both debt and common equity. Currently, the company has a market value of equity of $50 million, of which the company is financed with $10 million of external equity and $40 million of internal equity. The company also has a market value of short-term debt of $25 million and a market value of long-term debt of $25 million. The cost of equity is 15%, the cost of short-term debt is 7%, and the cost of long-term debt is 8%. Further, flotation costs on the external equity have summed to 4%. If the marginal tax rate is 40%, what is the weighted-average cost of capital? (Round to the nearest hundredth.)____________
9. Suppose a firm is looking to calculate the cost of common equity using the arithmetic mean return for the companys stock over the past six years. The company reported returns of 13.5%, 15.4%, 8.4%, 19.1%, 22.1%, and 4.3% over the last six years. Given this information, what is the cost of common equity as a percent? (Round to the nearest hundredth.)___________
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started