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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 8.34 percent while the borrowing? firm's corporate tax rate is 34 percent.

b. Common stock for a firm that paid a ?$1.03 dividend last year. The dividends are expected to grow at a rate of 4.1 percent per year into the foreseeable future. The price of this stock is now ?$24.51.

c. A bond that has a ?$1,000 par value and a coupon interest rate of 11.1 percent with interest paid semiannually. A new issue would sell for ?$1,147 per bond and mature in 20 years. The? firm's tax rate is 34 percent.

d. A preferred stock paying a dividend of 7.1 percent on a ?$110 par value. If a new issue is? offered, the shares would sell for ?$83.76 per share.

a. The? after-tax cost of debt debt for the firm is _______%. ?(Round to two decimal? places)

b. The cost of common equity 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 preferred stock for the firm is ________?%. ?(Round to two decimal? places)

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92172059

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