Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem: Cost of capital Coleman Technologies is considering a main expansion program that has been proposed by the firm's information technology group. Before proceeding with the expansion, the company must estimate cost of capital. Suppose that you are an assistant to Jerry Lehman, the financial vice president. Your 1st task is to estimate Coleman's cost of capital. Lehman has provided you with the following data, which he believes may be relevant to your task.

[A] The company's tax rate is 40%.

[B] The current price of Coleman's 12% coupon, semiannual payment, no callable bonds with 15 years remaining to maturity is $1,153.72. Coleman does not use short-term interest bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.

[C] The current price of the company's 10%, $100 par value, quarterly dividend, perpetual preferred stock is $111.10.

[D] Coleman's common stock is currently selling for $50 per share. Its last dividend (D_0) was $4.19, & dividends are expected to grow at a constant rate of 5% in the foreseeable future. Coleman's beta is 1.2, the yield on T-bonds is 7%, & the market risk premium is estimated to be 6%. For the bond-yield-plus-risk-premium approach, the firm uses a risk premium of 4%.

[E] Coleman's target capital structure is 30% debt, 10% preferred stock, & 60% common equity.

find out final estimate for rs?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M920374

Have any Question? 


Related Questions in Basic Finance

What type of construction contract provides the greatest

What type of construction contract provides the greatest incentive for a construction contractor to minimize project cost?

If you suspect that a companys advertising expenditures in

If you suspect that a company's advertising expenditures in a given month affect its sales in future months, what correlations would you look at to confirm your suspicions? How would you find them?

How do reits differ from other mutual fundsare all reits

How do REITs differ from other mutual funds? Are all REITs pretty much the same? What are their differences?

Wy are voids filled with lightweight infilling

Why are voids filled with lightweight infilling material in raft foundation of pumping stations?

Topic water and real estatewrite a 1 page reviewcommentary

Topic: Water and Real Estate Write a 1 page review/commentary on an article from a magazine, newspaper, Wall Street Journal, etc. on the following topics. Due dates are listed below. This should be a news item and not fr ...

Global interaction among yield curves assume that the yield

Global Interaction among Yield Curves : Assume that the yield curves in the United States, France, and Japan are flat. If the U.S. yield curve suddenly becomes positively sloped, do you think the yield curves in France a ...

Choose a stock from the attachportfolio information-

Choose a stock from the attach(Portfolio Information- Public),and do a report in ppt(Econ Update Q3 2016.pptx),why you choose it,also you need to do is the analyst. The simply template is also in attach.(SMIF Analyst Rep ...

A loan is offered with monthly payments and a 1625 percent

A loan is offered with monthly payments and a 16.25 percent APR. What's the loan's effective annual rate (EAR)? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Define the concepts of compounding and discountinguse

Define the concepts of compounding and discounting. Use future values and present values to explain how these concepts are related.

Communication is our way of sharing ideas and experiences

Communication is our way of sharing ideas and experiences with other individuals, groups, and institutions. Public relations is very much a communication process and effective communication is at the core of strategic pu ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate