Question
In: Finance
(Individual or component costs of capital) Compute the cost of capital for the firm for the...
(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 7.57% while the borrowing firm's corporate tax rate is 30%. b. Ordinary shares for a firm that paid a $ 1.02 dividend last year. The dividends are expected to grow at a rate of 4.2 4.2% per year into the foreseeable future. The price of these shares is now $ 24.51. c. A bond that has a $ 1,000 face value and a coupon interest rate of 11.2% with interest paid semi-annually. A new issue would sell for $ 1,147 per bond and mature in 20 years. The firm's tax rate is 30%. d. A preference share paying a dividend of 6.5% on a $ 107 107 face value. If a new issue is offered, the shares would sell for $ 86.07 per share.
a. The after-tax cost of debt debt for the firm is %. (Round to two decimal places.)
b. The cost of ordinary shares for the firm is %. (Round to two decimal places.)
c. The after-tax cost of debt for the firm is %. (Round to two decimal places.)
d. The cost of preference shares for the firm is %. (Round to two decimal places.)
please answer asap I am in the middle of exam, thanks
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jeff jeffy answered 1 year agoRelated Solutions
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6
percent. A new issue would have a floatation cost of
7
percent of the
$1,130
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9
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with an annual dividend payment of
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