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problem1. Hybrid Hydro Plants Inc that has a marginal tax rate which is equal to 34 percent has preferred stock which pays a constant dividend which is equal to $15 per share. The stock currently sells for $125. When the company acquires a 3 percent flotation cost each time it issues preferred stock, what is cost of issuing preferred stock?

problem2. Womileg Industries plans to issue $70 par preferred stock with an 8 percent dividend to raise funds. The stock is selling on the market for $56, and Maness must pay flotation costs of 6 percent of the market price to issue the stock. What is the cost of the preferred stock for Womileg?

problem3. Scalon Inc's CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: risk free rate=3.50%, market risk premium =4.50% and common stock beta=1.35. Based on the CAPM approach what is cost of common equity?

problem4. The Watermelons Co has a bond outstanding which matures in 15 years, carries a 3 percent coupon, and pays interest yearly. The bond has a market value of $1,045.50. The company has a corporate tax rate of 34 percent. What is pre-tax cost of debt?

Financial Accounting, Accounting

  • Category:- Financial Accounting
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