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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 ?$1000 par value? (face value) and a contract or coupon interest rate of 12.8 percent that is paid semiannually. The bond is currently selling for a price of $1,231, and will mature in 10 years. The firm's tax rate is 34 %

C. A new common stock issue that paid a ?$1.77 dividend last year. The par value of the stock is $14 and the firm's dividends per share have grown at a rate of 8.3 percent per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now ?$28.01

D. Preffered stock oaying 10.8% dividend on a $123 par value. The preferred shares are currently selling doe $153.04

E. A bond selling to yield 12.7 percent for the purchaser of the bond. The borrowing firm faces a tax rate of 34%

A. The after tax cost of debt from the firm is ____

C The cost of common equity for the firm is ____

D The cost of preferred stock for the firm is ___

E The after tax cost of debt for the firm is ___

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92765405

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