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(Individual 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 10.9%. Interest payments are $54.50. The bonds have a current market value of $1,120 and will mature in 10 years. The firm’s marginal tax rate is 34%

b:  A new common stock issue that paid a $1.78 divided last year. The firm’s dividends are expected to continue to grow at 7.3% per year forever. The price of the firm’s common stock is now $27.65

c: A preferred stock that sells for $152 pays a dividend of 8.4% and has a $100 par value

d. A bond selling to yield 12.2% where the firms tax rate is 34%.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91266536

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