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Your Company is planning an expansion and needs to develop an estimate of the firm?s cost of capital.

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Question;Your Company is planning an expansion and needs to develop an estimate of the firm?s cost of capital. You have gathered the following data:? Tax rate is 40%? The price of Your Company?s 12 percent coupon, annual payment, noncallable $1,000 face value bonds with 15 years to maturity is $1,153.72. The company does not use short-term debt on a permanent basis. New bonds would be privately placed with no flotation cost.? The price of Your Company?s 10 percent, $100 par value, quarterly dividend preferred stock is $111.10.? Your Company?s common stock is selling for $50 per share. Its last dividend was $4.19, and dividends are expected to grow at a constant 5 percent rate.? If Your Company issues new common stock, it will incur a 15 percent flotation cost.?Your Company?s target capital structure is 30 percent long-term debt, 10 percent preferred stock, and 60 percent equity.Determine:(a) The cost of debt.(b) The cost of retained earnings.(c) The cost of new equity.(d) The WACC using retained earnings.

 

Paper#50616 | Written in 18-Jul-2015

Price : $22
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