Question
In: Finance
Q) A transport company is interested in measuring its specific cost of capital of different sources...
Q) A transport company is interested in measuring its specific cost of capital of different sources as well as the overall cost of capital the following information is provided and is associated with the sale of equity shares preference share and debentures. Equity share the current market price of equity is 125 per share and the firm is expected to pay a dividend of 15 at the end of the current year. Growth rate in dividends is 9%.the new equity share can be sold at 123 per share (an underwriting fee of 2 per share is payable) the 15% preference share of 100 each can be sold at premium of 10% (an underwriting fee of 2 per share is payable) the company sell 15 years 14% debentures of 1,000 each for 970.tax rate is 48%, further the book value of different sources is as follow
Sources Book value
Equity share capital 600
Preference share 300
Long term debts 200
Required
- Specific cost of capital
- Weighted average cost of capital
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Calculation of individual costs and WACCLang Enterprises is interested in measuring its overall cost of capital....
Calculation of individual costs and WACCLang
Enterprises is interested in measuring its overall cost of capital.
Current investigation has gathered the following data. The firm is
in the 27% tax bracket.
Debt The firm can raise debt by selling
$1,000-par-value, 8% coupon interest rate,17-year bonds on which
annual interest payments will be made. To sell the issue,
an average discount of
$50 per bond would have to be given. The firm also must pay
flotation costs of $20 per bond....
Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the...
Lang Enterprises is interested in measuring its overall cost of
capital. Current investigation has gathered the following
data. The firm is in the 30% tax bracket.
DEBT: The firm can raise debt by selling $1,000 par value, 9%
coupon interest rate, 17 year bonds on which annual interest
payments will be made. To sell the issue, an average
discount of $25 per bond would have to be given. The firm also must
pay flotation costs of $15 per bond.
PREFERRED STOCK: The...
Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the...
Lang Enterprises is interested in measuring its overall cost of
capital. Current investigation has gathered the following data. The
firm is in the 21% tax bracket. Debt: The firm can raise debt by
selling 1,000-par-value, 8% coupon interest rate, 20-year bonds
on which annual interest payments will be made. To sell the issue,
an average discount of $30 per bond would have to be given. The
firm also must pay flotation costs of $30 per bond. Preferred
stock: The firm...
Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the...
Lang Enterprises is interested in measuring its overall cost of
capital. Current investigation has gathered the following data. The
firm is in the 21% tax bracket.
Debt: The firm can raise debt by selling 1,000-par-value, 8%
coupon interest rate, 20-year bonds on which annual interest
payments will be made. To sell the issue, an average discount
of
$30 per bond would have to be given. The firm also must pay
flotation costs of $30 per bond.
Preferred stock: The firm...
Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the...
Lang Enterprises is interested in measuring its overall cost of
capital. Current investigation has gathered the following data. The
firm is in the 25% tax bracket.
Debt: The firm can raise debt by selling
$1,000-par-value,7% coupon interest rate,18-year bonds on which
annual interest payments will be made. To sell the issue, an
average discount of $50 per bond would have to be given. The firm
also must pay flotation costs of $25 per bond.
Preferred stock: The firm can sell...
Shelll is currently measuring its cost of capital for purchasing a piece of land for its...
Shelll is currently measuring its cost of capital for purchasing
a piece of land for its future R&D center. The center is
located in the middle of Geneva. The management has the following
financing options:
Shell can raise its capital by selling 20 years, U$D1,000
par-value, 6 percent coupon interest rate bonds that pay
semi-annual interest. Floatation cost is 5 percent on the selling
price of U$D980.
Shell can issue a 10 percent, U$D100 par value, preferred stock
that price...
Calculation of individual costs and WACC Lang Enterprises is interested in measuring its overall cost of...
Calculation of individual costs and WACC Lang Enterprises is
interested in measuring its overall cost of capital. Current
investigation has gathered the following data. The firm is in the
35% tax bracket.Debt The firm can raise debt by selling
$1,000-par-value, 5% coupon interest rate, 10-year bonds on
which annual interest payments will be made. To sell the issue, an
average discount of $30per bond would have to be given. The firm
also must pay flotation costs of $25per bond.Preferred stock ...
Calculation of individual costs and WACC Lang Enterprises is interested in measuring its overall cost of...
Calculation of individual costs and WACC Lang Enterprises is
interested in measuring its overall cost of capital. Current
investigation has gathered the following data. The firm is in
the
30%tax bracket.
Debt The firm can raise debt by selling
$1000 par-value,
9%
coupon interest rate,
17-year
bonds on which annual interest payments will be made. To sell
the issue, an average discount of
$25
per bond would have to be given. The firm also must pay
flotation costs of
$20...
Calculation of individual costs and WACC Lang Enterprises is interested in measuring its overall cost of...
Calculation of individual costs and WACC Lang
Enterprises is interested in measuring its overall cost of capital.
Current investigation has gathered the following data. The firm is
in the 24 % tax bracket.
Debt The firm can raise debt by selling $1000
-par-value, 9 % coupon interest rate, 17 -year bonds on which
annual interest payments will be made. To sell the issue, an
average discount of $30 per bond would have to be given. The firm
also must pay...
Calculation of individual costs and WACC Lang Enterprises is interested in measuring its overall cost of...
Calculation of individual costs and WACC Lang Enterprises is
interested in measuring its overall cost of capital. Current
investigation has gathered the following data. The firm is in
the
30%
tax bracket.
Debt The firm can raise debt by selling
$1,000-par-value,
7%
coupon interest rate,
16-year
bonds on which annual interest payments will be made. To sell
the issue, an average discount of
$20
per bond would have to be given. The firm also must pay
flotation costs of
$25...
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