Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. Total Market Value for the Firm After-tax cost of Debt Cost of Equity Cost of Preferred Stock Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures:
Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for
80 percent of par, the bonds make semi-annual payments
Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80
for $150 per share
Market Information - 6 percent market risk premium and 4 percent risk-free rate.
Required: Calculate the following if the company has a tax rate of 36 percent.
Total Market Value for the Firm
After-tax cost of Debt
Cost of Preferred Stock
Weighted Average Cost of Capital
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