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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 7.12% while the borrowing firms corporate tax rate is 34%.

The after tax cost of debt for the firm is?

b) Common stock for a firm that paid $1.03 dividend last year. The dividends are expected to grow at a rate of 4.3%.per year, well into the future. The price of this stock is now $25.21

The cost of common equity for the firm is?

c) A bond has a $1000 par value and a coupon rate of 11.5% with interest paid semiannually. A new issue would sell for $1,147 per bond and mature in 20 years. Firms tax rate = 34%

The after tax cost of debt for firm is?

d) A preferred stock paying a dividend of 7.8% on a $90 par value. If a new issue was offered, the shares would sell for $84.29

The cost of preferred stock for the firm is?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9791604

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