Question
The Killington Corporation has planned capital expenditures of $40 million for the upcoming fiscal year. Killington's stock is currently selling at $22 per share. Flotation
The Killington Corporation has planned capital expenditures of $40 million for the upcoming fiscal year. Killington's stock is currently selling at $22 per share. Flotation costs are 10%. The earnings growth rate has been steady and is expected to continue. The last dividend paid was $0.97 per share and is expected to grow at a rate of 9%. The company tax rate is 40%. The Mortgage bonds are currently selling for $1,073.61. The bonds are 7%, $1,000 par and pay interest annually. They will mature in 10 years.
Compute the after-tax cost of each component of capital.
a) Bonds
b) Retained Earnings
c) New Common Stock
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The New Microfinance Handbook A Financial Market System Perspective
Authors: Joanna Ledgerwood, Julie Earne, Candace Nelson
1st Edition
0821389270, 978-0821389270
