Bonds Builtrite is planning on offering a $1000 par value. 20 year, 5% coupon bond with an expected Flotation costs would be $55 per bond. Preferred Stock Builtrite could sell a $46 par value preferred with a 5% coupon for $38 a share. Flotation costs would be 34 a share Common stock Currently, the stock is selling for $62 a share and has paid a $3.82 dividend. Dividends are expected to continue growing at 10%. Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 30% tax bracket. Their after-tax cost of debt is: 3.68% O4.15% O. 6.13% 6.80%
Bonds Builtrite is planning on offering a $1000 par value. 20 year, 5% coupon bond with an expected Flotation costs would be $55 per bond. Preferred Stock Builtrite could sell a $46 par value preferred with a 5% coupon for $38 a share. Flotation costs would be 34 a share Common stock Currently, the stock is selling for $62 a share and has paid a $3.82 dividend. Dividends are expected to continue growing at 10%. Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 30% tax bracket. Their after-tax cost of debt is: 3.68% O4.15% O. 6.13% 6.80%
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
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Transcribed Image Text:Bonds Builtrite is planning on offering a $1000 par value, 20 year, 5% coupon bond with an expected selling price of $1025
Flotation costs would be $55 per bond
Preferred Stock Builtrite could sell a $46 par value preferred with a 5% coupon for $38 a share. Flotation costs would be $4 a
share
Common stock Currently, the stock is selling for $62 a share and has paid a $3.82 dividend. Dividends are expected to
continue growing at 10%. Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings
Assume a 30% tax bracket.
Their after-tax cost of debt in:
O 3.68%
O4.15%
O 6.13%
6.80%
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