The Accidental Petroleum Company is trying to determine its weighted average cost of;capital for use in making a number of investment decisions. The firm's bonds were issued;6 years ago and have 14 years left until maturity. They carried an 8% coupon rate, and are;currently selling for $962.50.;The firm's preferred stock carries a $4.60 dividend and is currently selling at $42.50 per;share. Accidental's investment banker has stated that issue costs for new preferred will be;50 cents per share.;The firm has significant retained earnings, but will also need to sell new common stock to;finance the projects it is now considering. Accidental Petroleum common stock is;expected to pay a $2.50 per share dividend next year, and is expected to maintain an 8%;growth rate for the foreseeable future. The stock is currently priced at $50 per share, but;new common stock will have flotation costs of 60 cents per share.;Calculate the costs of the various components of Accidental Petroleum's capital (Kd, Kp;Ke, Kn). The firm's tax rate is 34%.
Paper#33558 | Written in 18-Jul-2015Price : $32