(Individual or component costs of capital) 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 11.0 percent. Interest payments are $55.00 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percent.b. A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7.0 percent per year, forever. The price of the firm's common stock is now $27.50.c. A preferred stock that sells for $125, pays a dividend of 9.0 percent, and has a $100 par value. d. A bond selling to yield 12.0 percent where the firm's tax rate is 34 percent. a. The after-tax cost of debt is %. (Round to two decimal places.)b. The cost of common equity is %. (Round to two decimal places.)c. The cost of preferred stock is %. (Round to two decimal places.)d. The after-tax cost of debt is %. (Round to two decimal places.)
(Individual or component costs of capital)
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 11.0 percent. Interest payments are $55.00 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7.0 percent per year, forever. The price of the firm's common stock is now $27.50.
c. A
d. A bond selling to yield 12.0 percent where the firm's tax rate is 34 percent.
a. The after-tax cost of debt is %. (Round to two decimal places.)
b. The
c. The cost of preferred stock is %. (Round to two decimal places.)
d. The after-tax cost of debt is %. (Round to two decimal places.)
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