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Individual or component costs of? capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in? this, 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 11.1 percent that is paid semiannually. The bond is currently selling for a price of ?$1128 and will mature in 10 years. The? firm's tax rate is 34 percent. b. If the? firm's bonds are not frequently? traded, how would you go about determining a cost of debt for this? company? c. A new common stock issue that paid a ?$1.76 dividend last year. The par value of the stock is ?$16?, and the? firm's dividends per share have grown at a rate of 8.6 percent per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now ?$28.38. d. A preferred stock paying a 10.6 percent dividend on a ?$125 par value. The preferred shares are currently selling for $148.28. e. A bond selling to yield 13.5 percent for the purchaser of the bond. The borrowing firm faces a tax rate of 34 percent.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92051449

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