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Compute the cost of capital for the firm using the following:

a) a bond that has a $1000 par value (face value) and a contract or coupon interest rate of 11.1%. The bonds have a current market value of $1,128 and will mature in 10 years. The firm's marginal tax rate is 34%

b) A new common stock issue that paid a $1.83 dividend last year. The firm's dividends are expected to continue to grow at 7.2% per year forever. The price of the firm's common stock is now $27.64.

c) A preferred stock paying a 9.1% dividend on a $128 par value.

d)A bond selling to yeild 11.9% where the firm's tax rate is 34%

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M946933

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