- Calculate the weighted average cost of capital for Foggy Futures Weather
Forecasters.
The firm is in the 25% tax bracket. The optimal capital structure is listed below:
|
SOURCE OF CAPITAL |
WEIGHT |
|
Debt |
20% |
|
|
30% |
|
Common Stock |
50% |
|
Debt |
The firm can issue $1000 par value, 9% coupon interest bond with a 15 year maturity date. The bond has an average discount of $20 and flotation costs of $30 per bond. The selling price is $1,000 |
|
Preferred Stock |
The firm can sell preferred stock with a dividend that is 10% of the current price of $95. The cost of issuing and selling the stock is expected to be $7 per share |
|
Common Stock |
The firm's common stock is currently selling for $100 per share. The firm expects to pay cash dividends of $12 per share next year. The dividends have been growing at 8%. The stock was discounted by $7, and the flotation costs amounted to $5 per share. |
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