Question
In: Accounting
Target Market Source of Capital Proportions Long-term debt 30% Preferred stock 5% Common stock equity 65%...
|
|
|
|
Source of Capital |
Proportions |
|
Long-term debt |
30% |
|
Preferred stock |
5% |
|
Common stock equity |
65% |
Debt: The firm can sell a 10-year, $1,000 par value, 7 percent bond for $950. A flotation cost of 3percent of the par value would be required in addition to the discount of $50.
Preferred Stock: The firm has determined it can issue preferred stock at $45 per share par value. The stock will pay an $6.5 annual dividend. The cost of issuing and selling the stock is $2.5 per share.
Common Stock: The firm's common stock is currently selling for $25 per share. The dividend expected to be paid at the end of the coming year is $3.75. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $1.45. It is expected that to sell, a new common stock issue must be underpriced at $2 per share and the firm must pay $0.75 per share in flotation costs.
Additionally, the firm's marginal tax rate is 20 percent. Calculate the firm's weighted average cost of capital assuming the firm has exhausted all retained earnings.
Please solve Before tax cost of debt with manually to paper
please solve not excel thx
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Target Market Source of Capital Proportions Long-term debt 30% Preferred stock 5% Common stock equity 65%...
Target Market
Source of Capital
Proportions
Long-term debt
30%
Preferred stock
5%
Common stock equity
65%
Debt: The firm can sell a 10-year, $1,000 par value, 7 percent
bond for $950. A flotation cost of 3percent of the par value would
be required in addition to the discount of $50.
Preferred Stock: The firm has determined it can issue preferred
stock at $45 per share par value. The stock will pay an $6.5 annual
dividend. The cost of issuing and...
Source of Capital Proportions Long-term debt 30% Preferred stock 5% Common stock equity 65% Debt: The...
Source of Capital
Proportions
Long-term debt
30%
Preferred stock
5%
Common stock equity
65%
Debt: The firm can sell a 10-year, $1,000 par value, 7 percent
bond for $950. A flotation cost of 3percent of the par value would
be required in addition to the discount of $50.
Preferred Stock: The firm has determined it can issue preferred
stock at $45 per share par value. The stock will pay an $6.5 annual
dividend. The cost of issuing and selling the...
Pearson motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock.
Pearson motors has a target capital structure of 30% debt and
70% common equity, with no preferred stock. The yield to maturity
on the company’s out standing bonds is 9%, and its tax rate is 40%.
Pearsons CFO estimates that the company’s WACC is 10.50%. What is
Pearson’s cost of common equity?
The firm's target capital structure is the mix of debt, preferred stock, and common equity the...
The firm's target capital structure is the mix of debt,
preferred stock, and common equity the firm plans to raise funds
for its future projects. The target proportions of debt, preferred
stock, and common equity, along with the cost of these components,
are used to calculate the firm's weighted average cost of capital
(WACC). If the firm will not have to issue new common stock, then
the cost of retained earnings is used in the firm's WACC
calculation. However, if...
The firm's target capital structure is the mix of debt, preferred stock, and common equity the...
The firm's target capital structure is the mix of debt,
preferred stock, and common equity the firm plans to raise funds
for its future projects. The target proportions of debt, preferred
stock, and common equity, along with the cost of these components,
are used to calculate the firm's weighted average cost of capital
(WACC). If the firm will not have to issue new common stock, then
the cost of retained earnings is used in the firm's WACC
calculation. However, if...
Zacks's target capital structure is 39% long-term debt, 11% preferred stock, and 50% equity. The firm...
Zacks's target capital structure is 39% long-term debt, 11%
preferred stock, and 50% equity.
The firm has one outstanding 16.92% bond issue that matures on
May 13, 2035, makes semiannual payments, and currently sells for
$900 per bond. Assume that May 13, 2020, is the settlement date for
the bond issue.
Odarian's preferred stock pays an annual dividend of $15.32 and
currently sells for $93.34.
The company's common stock's returns have a covariance of
0.00467206952 with the market's returns. The...
The firm’s target capital structure is 60% common stock, 30% debt, and 10% preferred stock. Debt:...
The firm’s target capital structure is 60%
common stock, 30% debt, and 10% preferred stock.
Debt: 7,000 5.0% coupon bonds outstanding, with 11 years to
maturity, $1,000 par value and a quoted price of 106.25% of par
value. These bonds pay interest semiannually.
Common Stock: 300,000 shares of common stock selling for $65.40
per share. The stock has a beta of 1.44.
Preferred Stock: 8,500 shares of preferred stock selling at
$96.00 per share and pay annual dividends of $5.70....
Company has the following target capital structure, in market value terms: Debt 30% Preferred Stock 10% Common...
Company has the following target
capital structure, in market value terms:
Debt
30%
Preferred
Stock 10%
Common Stock 60%
In addition, you know the
following:
· At present the company’s debt is
composed of $1,000 par bonds issued exactly three years ago, that
pay a semiannual coupon, with a nominal annual rate of 7%, that
have a ten-year maturity, and that are now selling for $1,150.
· The company’s preferred stock is
paying a $1.50 annual dividend and is currently selling...
7. Prego Corp. has a target capital structure of 30% debt, 60% common equity, and preferred...
7. Prego Corp. has a target capital structure of 30% debt, 60%
common equity, and preferred stock of 10%. The yield to maturity on
the company’s outstanding bonds is 9%, and its tax rate is 21%. The
cost of preferred stock is 5%. Prego’s CFO estimates that the
company’s WACC is 9.96%. What is Prego’s cost of equity?
8. If the total capital structure is $90,000,000 and the debt to
equity ratio is 50%, what is the dollar amount of...
Pearson Motors has a target capital structure of 35% debt and 65% common equity, with no...
Pearson Motors has a target capital structure of 35% debt and
65% common equity, with no preferred stock. The yield to maturity
on the company's outstanding bonds is 8%, and its tax rate is 40%.
Pearson's CFO estimates that the company's WACC is 13.10%. What is
Pearson's cost of common equity? Do not round intermediate
calculations. Round your answer to two decimal places.
%
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