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You have just been hired to compute the cost of capital for debt, preferred stock, and common stock for the Mindflex Corporation. Cost of debt:

You have just been hired to compute the cost of capital for debt, preferred stock, and common stock for the Mindflex Corporation.

  1. Cost of debt: Since Mindflex's bonds do not trade very frequently, you have decided to use 8.33 percent as your cost of debt, which is the yield to maturity on a portfolio of bonds with a similar credit rating and maturity as Mindflex's outstanding debt. In addition, Mindflex faces a corporate tax rate of 34 percent.
  2. Cost of common equity: Mindflex's common stock paid a $1.21 dividend last year. In addition, Mindflex's dividends are growing at a rate of 5.6 percent per year and this growth rate is expected to continue into the foreseeable future. The price of this stock is currently $29.25.
  3. Cost of debt: Now let's assume that Mindflex's bonds are frequently traded. A Mindflex bond has a $1,000 par value (face value) and a coupon interest rate of 13.4 percent that is paid semiannually. The bonds are currently selling for $1,127 and will mature in 20 years. Mindflex's corporate tax rate is 34 percent.
  4. Cost of preferred stock: Mindflex's preferred stock pays a dividend of 6.4 percent on a $127 par value. However, the market price at which the preferred shares could be sold is only $89.34.
  1. The after-tax cost of debt for the firm is 5.50 %. (Round to two decimal places.)
  2. The cost of common equity for the firm is 9.97 %. (Round to two decimal places.)
  3. The after-tax cost of debt for the firm is___%.
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(Individual or component costs of capital) You have just been hited to compute the cost of capical for debt, prefarred slock and common stck for the Mingthex Corporation. credit rating and maturity as Mindfex's outstanding debt. In additon, Mindtex faces a corporate tax rate of 34 percent. b. Cost of common equity: Minollex's common stock pald a $1.21 dividend last year. In addition. Mindflex's dividends are growing at a fase of 5.5 percent per year and this grosth rate is appectid to continue into the foreseeablo future. The price of this stock is currently $20.26. c. Cost of debt. Now let's assume that Mindflex's bonds ace frequently traded. A Mindflex bond has a $1,000 par value (face value) and a coupon interast rate of 13.4 percont that is paid semiannualiy. The bonds are currenty selling for 51,127 and will mature in 20 years. Mindlex's corporate tax rate is 34 percent. d. Cost of preferred stock: Mindfex's proferred thock pays a dividend of 6.4 percent en a $127 par value. Howevec, the market price at which the prefered shares could be sold is oory s99.34 a. The affer-tax cost of debt for the firm is 5.50%. (Round to two decima places.) b. The cost of common equity for the firm is: 9.97%. (Round to two decimal places.) c. The after-tax cost of debt for the firm is %. (Round to two decimal places.)

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