Question

In: Finance

Calculate the following costs of​ capitals: a. A $1,000 par value bond with a market price...

Calculate the following costs of​ capitals:

a. A $1,000 par value bond with a market price of $970 and a coupon interest rate of 11 percent. Flotation costs for a new issue would be approximately 6 percent. The bonds mature in 14 years and the corporate tax rate is 21 percent.

b. A preferred stock selling for $106 with an annual dividend payment of $12. The flotation cost will be $5 per share. The​ company's marginal tax rate is 21 percent.

c. Retained earnings totaling $4.8 million. The price of the common stock is $66 per​ share, and dividend per share was $9.18 last year. The dividend is not expected to change in the future.

d. New common stock for which the most recent dividend was $2.97. The​ company's dividends per share should continue to increase at a growth rate of 11 percent into the indefinite future. The market price of the stock is currently $47​; ​however, flotation costs of $6 per share are expected if the new stock is issued.

a. What is the​ firm's after-tax cost of debt on the​ bond?

b. What is the cost of capital for the preferred​ stock?

c. What is the cost of internal common​ equity?

d. What is the cost of external common​ equity?

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

1. Calculate the current price of a $1,000 par value bond that has a coupon rate...
1. Calculate the current price of a $1,000 par value bond that has a coupon rate of 8 percent, pays coupon interest annually, has 17 years remaining to maturity, and has a current yield to maturity (discount rate) of 12 percent. (Round your answer to 2 decimal places and record without dollar sign or commas). 2. Calculate the current price of a $1,000 par value bond that has a coupon rate of 15 percent, pays coupon interest annually, has 15...
The current price of a 10-year, $1,000 par value bond is $1,000. Interest on this bond...
The current price of a 10-year, $1,000 par value bond is $1,000. Interest on this bond is paid every six months, and the simple annual yield is 14 percent. Given these facts, what is the annual coupon rate on this bond? a. 10% b. 12% c. 14% d. 17% e. 21%
1. Calculate the price of a bond with Face value of bond is $1,000 and: a....
1. Calculate the price of a bond with Face value of bond is $1,000 and: a. Bond yield of 8.4%, coupon rate of 7% and time to maturity is 5 years. Coupon is paid semi-annually (Bond 1) b. Bond yield of 7%, coupon rate of 8% and time to maturity is 4 years. Coupon is paid semi-annually c. Calculate the price of Bond 1 right after the 5th coupon payment. 2. Arcarde Ltd issues both ordinary shares and preference shares...
The market price is ​$900 for a 16​-year bond ​($1,000 par​ value) that pays 12 percent...
The market price is ​$900 for a 16​-year bond ​($1,000 par​ value) that pays 12 percent annual​ interest, but makes interest payments on a semiannual basis ​(6 percent​ semiannually). What is the​ bond's yield to​ maturity?
The market price is ​$1,075 for a 19​-year bond ​($1,000 par​ value) that pays 11 percent...
The market price is ​$1,075 for a 19​-year bond ​($1,000 par​ value) that pays 11 percent annual​ interest, but makes interest payments on a semiannual basis ​(5.5 percent​ semiannually). What is the​ bond's yield to​ maturity?
The market price is ​$1,050 for a 9​-year bond ​($1,000 par​value) that pays 9 percent...
The market price is $1,050 for a 9-year bond ($1,000 par value) that pays 9 percent annual interest, but makes interest payments on a semiannual basis (4.5 percent semiannually). What is the bond's yield to maturity?
The market price is $850 for a 10​-year bond ($1,000 par​ value) that pays 9 percent...
The market price is $850 for a 10​-year bond ($1,000 par​ value) that pays 9 percent annual​ interest but makes interest payments on a semiannual basis (4.5 percent​ semiannually). What is the​ bond's yield to​ maturity? The​ bond's yield to maturity is ____​ (Round to two decimal​ places.) 2. (Bond valuation)​Fingen's 16​-year, $1,000 par value bonds pay 14 percent interest annually. The market price of the bonds is $870 and the​ market's required yield to maturity on a​ comparable-risk bond...
Consider a convertible bond as follows: par value = $1,000; coupon rate = 9.0% market price...
Consider a convertible bond as follows: par value = $1,000; coupon rate = 9.0% market price of convertible bond = $1,000 conversion ratio = 37 estimated straight value of bond = $500 yield to maturity of straight bond = 18.1% Assume that the price of the common stock is $20 and that the dividend per share is $0.75 per year. Answer the below questions. (a) Calculate each of the following (1) conversion value, (2) market conversion price, (3) conversion premium...
Find the price of a bond. The time is today. The $1,000 par value corporate bond...
Find the price of a bond. The time is today. The $1,000 par value corporate bond you are interested in has a 5% coupon rate, paid semi-annually. The maturity of the bond is 20 years. The rating agencies have determined that this company should have a B+ rating, making its yield be 6%. Show a time line of these cash flows.   What is the price you will have to pay for the bond? N                I                 PV              PMT           FV
Calculate the value of a bond that matures in 15 years and has a $1,000 par...
Calculate the value of a bond that matures in 15 years and has a $1,000 par value. The annual coupon interest rate is 14 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 11 percent.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT