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The financing of a firm is as follows: Debt: 1500 bonds with a 6% coupon rate, semiannual coupon payments, a price of $980, and 20-year
The financing of a firm is as follows: Debt: 1500 bonds with a 6% coupon rate, semiannual coupon payments, a price of $980, and 20-year maturity. Common Stock: 100,000 shares with price $25 and beta .9. Next year's dividend will be $2.00 and the growth rate of dividends after that will be 3%. Preferred Stock: 20,000 shares with a $5 dividend and current price of $95. The expected return on the market is 13% and the risk-free rate is 4%. The corporate tax rate is 21%. a. What is the market value of debt? b. What is the market value of common stock? C. What is the market value of preferred stock? d. What is the market value of the firm? e. What are the capital structure weights for debt, common stock, and preferred stock? f. What is the after-tax cost of debt? g. What is the best estimate of the cost of common equity? (Use all available information.) h. What is the cost of preferred equity? i. What is the weighted-average cost of capital
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