A firm's new financing will be in proportion to the market value of its current financing shown below. Carrying Amount ($000 Omitted) Long-term debt $7,000 Preferred stock (100,000 shares) 1,000 Common stock (200,000 shares) 7,000 The firm's bonds are currently selling at 80% of par, generating a current market yield of 9%, and the corporation has a 40% tax rate. The preferred stock is selling at its par value and pays a 6% dividend. The common stock has a current market value of $40 and is expected to pay a $1.20 per share dividend this fiscal year. Dividend growth is expected to be 10%, per year, and flotation costs are negligible. The firm's weighted-average cost of capital is (round calculations to tenths of a percent)

A firm's new financing will be in proportion to the market value of its current financing shown below. Carrying Amount ($000 Omitted) Long-term debt $7,000 Preferred stock (100,000 shares) 1,000 Common stock (200,000 shares) 7,000 The firm's bonds are currently selling at 80% of par, generating a current market yield of 9%, and the corporation has a 40% tax rate. The preferred stock is selling at its par value and pays a 6% dividend. The common stock has a current market value of $40 and is expected to pay a $1.20 per share dividend this fiscal year. Dividend growth is expected to be 10%, per year, and flotation costs are negligible. The firm's weighted-average cost of capital is (round calculations to tenths of a percent)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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