(Answered) Bad boys inc is evaluating its cost of capital under

Management Studies

Bad boys inc is evaluating its cost of capital under consultation. Bad boys inc expects to issue new debt at 8% par with a coupon rate of 8% and to issue new preffered stock with a $2.50 per share dividend at $25 a share. The common stock of Bad Boys is currently selling at $20 a share. Bad Boys Inc expects to pay a dividend of $1.50 a share next year. An equity analyst foresees a growth in dividends at a rate of 5% per year. Bad boys inc marginal tax rate is 35%. If Bad Boys Inc raises capital using 45% debt, 5% preferred stock, and 50% common stock, what is Bad Boys cost of capital?

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