Gardner, Inc., plans to finance its expansion by raising the needed investment capital from the following sources in the indicated proportions and respective capital cost rates: Capital Cost Source Bonds Preferred stock Common stock Retained earnings Proportion Rate 30% 13% 10% 9% 50% 12% 10% 9% 100% Calculate the weighted average cost of capital. Round answers to one decimal place. For example, 0.4567 = 45.7%. Bonds Preferred stock Common stock Retained earnings Weighted Average Cost of Capital 96 96 % % 96

Gardner, Inc., plans to finance its expansion by raising the needed investment capital from the following sources in the indicated proportions and respective capital cost rates: Capital Cost Source Bonds Preferred stock Common stock Retained earnings Proportion Rate 30% 13% 10% 9% 50% 12% 10% 9% 100% Calculate the weighted average cost of capital. Round answers to one decimal place. For example, 0.4567 = 45.7%. Bonds Preferred stock Common stock Retained earnings Weighted Average Cost of Capital 96 96 % % 96

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Capital Structure for the ABC Corp. is as follows: Preferred Stock $ 3,750 Common Stock $ 5,750 Bonds $ 15,500 The company has a 5.5% after tax cost of debt, a 12.75% cost of preferred stock and a 15.875% cost of common stock. What is the firm’s weighted average cost of capital?.
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(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.4 percent. Interest payments are $52.00 and are paid semiannually. The bonds have The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.76 dividend last year. The firm's dividends are expected to continue to grow at 7.8 percent per year, forever. The price of the firm's common stock is now $27.86. c. A preferred stock that sells for $125, pays a dividend of 9.1 percent, and has a $100 par value. d. A bond selling to yield 11.4 percent where the firm's tax rate is 34 percent. current market value of $1,125 and will mature in 10 years. a. The after-tax cost of debt is %. (Round to two decimal places.)
Use the information provided below to answer the following questions: 4.1 Calculate the weighted average cost of capital (calculations expressed to two decimal places, where applicable). (16 marks) 4.2 Calculate the cost of equity using the Gordon Growth Model (expressed to two decimal places). (4 marks) INFORMATION Capri Limited intends raising finance for a proposed new project. The financial manager has provided the following information to determine the present cost of capital to the company: The capital structure consists of the following: ■ 2 million ordinary shares issued at R2 each but currently trading at R3 each. The company’s beta coefficient is 1.4. The risk-free rate is 9%. The return on the market is 17%. ■ 1 million 12%, R2 preference shares with a market value of R3 per share. ■ R1 000 000 20% Bank loan, due in January 2026. Additional information ■ The Capital Asset Pricing Model is used to determine the cost of equity. ■ A dividend growth of 10% per annum on ordinary…
Assume Skyler Industries has debt of $4,950,000 with a cost of capital of 7.2% and equity of $4,950,000 with a cost of capital of 10.8%. What is Skyler’s weighted average cost of capital? Round your intermediate calculations and final answer to 3 decimal places.
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YTM Bond A $500 Million 100.82 4.36% Bond B $350 Million 101.36 4.49% Common Stock 42.5 Million Shares $28.21 per share E(R ) Market = 8.65% β = 1.27 Expected Dividend = $1.95 Rf = 2.10% Growth Rate = 2.75% Given this information, if the tax rate of the firm is 30%, what is the after-tax cost of debt?
Hello. I need help with the following question please. Taylor Company has a target capital structure that consists of $3.3 million of debt capital, $2.5 million of preferred stock financing, and $2.8 million of common equity. The corresponding weights of its debt, preferred stock, and common equity financing that should be used to compute its weighted cost of capital (rounded to the nearest wo decimal places) are: 38.37%, 29.07%, and 32.56%, respectively 32.04%, 34.53%, and 33.43%, respectively 29.07%, 32.56%, and 38.37%, respectively 34.53%, 33.43%, and 32.04%, respectively Consider the following case: Mason Limited, a key competitor of Taylor Company in the construction field, has a capital structure consisting of 45% debt, 5% preferred stock, and 50% common equity. Concerned that its cost of capital may put it at a competitive disadvantage vis-a-vis the Taylor Company, a Mason analyst has been tasked with computing and comparing the weighted costs…
Can you help me with B and c?
c) Calculate the cost of ordinary shares for each capital structure.
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