Question
In: Finance
Compute the cost of capital for the firm for the following: a. A bond that has...
Compute the cost of capital for the firm for the following:
a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.1%. Interest payments are $55.50 and are paid semiannually. The bonds have a current market value of $1,130 and will mature in 10 years. The firm's marginal tax rate is 34%. What is the after-tax cost of debt?
b. A new common stock issue that paid a $1.76 dividend last year. The firm's dividends are expected to continue to grow at 6.1% per year, forever. The price of the firm's common stock is now $27.12. What is the cost of common equity?
c. A preferred stock that sells for $132, pays a dividend of 8.6%, and has a $100 par value. What is the cost of preferred stock?
d. A bond selling to yield 12.6% where the firm's tax rate is 34%. What is the after-tax cost of debt?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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A bond that has a $1,000 par value (face value). And a contract
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Compute the cost of the following:
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(Individual or component costs of capital) Compute the cost of
the following:
a. A bond that has $1,000 par value (face value) and a
contract or coupon interest rate of 8 percent. A new issue would
have a floatation cost of 8 percent of the $1,140 market value.
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(Individual or component costs of capital) Compute the cost of the following: a. A bond that...
(Individual or component costs of capital) Compute the cost of
the following:
a. A bond that has $1,000 par value (face value) and a contract
or coupon interest rate of 6 percent. A new issue would have a
floatation cost of 7percent of the $1,130 market value. The bonds
mature in 6 years. The firm's average tax rate is 30 percent and
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b. A new common stock issue that paid a $1.80 dividend...
(Individual or component costs of capital) Compute the cost of the following: a. A bond that...
(Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has
$1000
par value (face value) and a contract or coupon interest rate
of
6
percent. A new issue would have a floatation cost of
7
percent of the
$1,130
market value. The bonds mature in
9
years. The firm's average tax rate is 30 percent and its
marginal tax rate is
32
percent.
b. A new common stock issue that paid a
$1.70...
(Individual or component costs of capital) Compute the cost of the following: a. A bond that...
(Individual or component costs of capital) Compute the cost of
the following:
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contract or coupon interest rate of 8 percent. A new issue would
have a floatation cost of 6 percent of the $1,120 market value.
The bonds mature in 13 years. The firm's average tax rate is 30
percent and its marginal tax rate is 35 percent.
b. A new common stock issue that paid...
(Individual or component costs of capital) Compute the cost of capital for the firm for the...
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$1 comma 000 par value (face value) and a contract or coupon
interest rate of 11.3 percent. Interest payments are $56.50 and
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a$1.79 dividend last year. The firm's dividends are expected to
continue to grow at7.3 percent per...
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