1. Warephase Corporation has preferred stock outstanding. The stock has a 16% dividend rate. The stock's marketprice is $80 per share, and its par value is $75. If new shares are issued, the firm will pay $3.50 per share inflotation costs. The corporate tax rate is 21%. What is the company's cost of preferred stock financing?O 12.40%O 16.73%O 13.46%9.12%15.69%

Preferred stock refers to the equity funds of the company that have preferential right of receiving…

Answered: 1. Warephase Corporation has preferred…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

mavis taylor corporation has just issued preferred stock. the stock has a 6% annual dividend and a 100$ par value nd was sold at $ 98.5 per share. flotation costs were an additional $3 per share, 1. calculate the cost of preferred stock? 2. if the firm sells the preferred stock with 10% annual dividend and 93$ after flotation costs, what is its cost? i need it today ... could u pls help me out sir ?
Bailey's has a preferred share issue outstanding with a current price of $26.57 per share and a par value of $25. The firm is expected to pay a dividend of $1.86 per share a year from today. What would be the cost of issuing new shares of preferred equity? (Round your final answer to the nearest percentage.) O 7.44% O 6.50% O 7.00% O 8.00%
A full equity firm has 5,000 shares outstanding worth $7 each. They are planning on issuing $10,000 of new perpetual debt at the 8% market rate of interest and using the proceeds to buy up stock. The effective tax rate is 25%. What is the change in the share price if they make the debt for equity exchange? Multiple Choice O $.50 per share $.20 per share $.80 per share $.16 per share
The Greenbriar is an all-equity firm with a total market value of $551,000 and 21,700 shares of stock outstanding. Management is considering issuing $153,000 of debt at an interest rate of 9 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares will the firm repurchase if it issues the debt securities? Multiple Choice • 49,590 shares • 542 shares 6,026 shares 6,695 shares 7,304 shares
Verizon Communications's preferred stocks are traded at $25.50 and pay a constant dividend of $1.17. What is Verizon Communications's cost of preferred stock if the tax rate is 25%? O 4.41% O 3.44% O 4.59% 4.13% O 4.22%
A firm issues preferred stock that has $70 par value abs pays a 15% annual dividend each year. Firms bankers willing to lay $84/share. Flotation costs equal to $8.45 per share. Determine difference between investors required rate of return and fursns cost of preferred stock.
A firm’s preferred stock currently sells for $90 per share and pays a dividend of $9 per share. However, the firm will only receive $85 per share from the sale of new preferred stock due to the floatation costs. What’s the firm’s component cost of Preferred stock? 10.6% 10.9% 11.8% 10.0%
1. ABC Corporation pays dividends of P10 per share every year. If the growth rate of the equity is expected to be zero, then?a. Dividends would continue to stay at P10 per share.b.The value of equity would remain the same every year.c. All earnings are paid out.d. All of the above2. Which lists the financing options from less to more risky?a.Ordinary shares, BondsB. Preference shares, Ordinary sharesC. Externally financed equity, Internally financed equityD. Equity, Debt3. If the lease agreement involves a seller-lessee and a buyer-lessor, the lease agreement is called a. a sales and leaseback agreementb. a leverage leasec. tripartite lease agreementd. finance lease4. ABC has profits of P100,000, P200,000, P250,000 and P200,000 during the last four quarters. It paid dividends of P0.30, P0.60, P0.75 and P2.20. Their dividend policy would most likely be a. Constant dividend per share plus extrab. Constant percentage of net earningsc. Constant percentage of net earnings plus extrad.…
n
A $60 par value preferred stock has a stated dividend of 6%, with a market price of $70. The company plans on raising cash in the market by selling more of the same preferred stock and investment bankers charge the company a 5% fee for selling it. The company’s stated tax rate is 25%. A. Calculate the before-tax cost of preferred stock to the company. B. Calculate the cost of preferred stock to the company after taxes.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS