HBM, Inc has the following capital structure: Assets $550,000 Debt Preferred stock Common stock $137,500 82,500 330,000 The common stock is currently selling for $14 a share, pays a cash dividend of $0.70 per share, and is growing annually at 7 percent. The preferred stock pays a $6 cash dividend and currently sells for $86 a share. The debt pays interest of 8.0 percent annually, and the firm is in the 30 percent marginal tax bracket. a. What is the after-tax cost of debt? Round your answer to two decimal places. b. What is the cost of preferred stock? Round your answer to two decimal places. % c. What is the cost of common stock? Assume that the current $0.70 dividend grows by 7 percent during the year. Round your answer to two decimal places. % d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places.
HBM, Inc has the following capital structure: Assets $550,000 Debt Preferred stock Common stock $137,500 82,500 330,000 The common stock is currently selling for $14 a share, pays a cash dividend of $0.70 per share, and is growing annually at 7 percent. The preferred stock pays a $6 cash dividend and currently sells for $86 a share. The debt pays interest of 8.0 percent annually, and the firm is in the 30 percent marginal tax bracket. a. What is the after-tax cost of debt? Round your answer to two decimal places. b. What is the cost of preferred stock? Round your answer to two decimal places. % c. What is the cost of common stock? Assume that the current $0.70 dividend grows by 7 percent during the year. Round your answer to two decimal places. % d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places.
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 13P
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Answer and solution please
![HBM, Inc has the following capital structure:
Assets $550,000
a. What is the after-tax cost of debt? Round your answer to two decimal places.
%
The common stock is currently selling for $14 a share, pays a cash dividend of $0.70 per share, and is growing annually at 7 percent. The preferred stock pays a $6 cash dividend and currently sells for $86 a share. The debt pays
interest of 8.0 percent annually, and the firm is in the 30 percent marginal tax bracket.
b. What is the cost of preferred stock? Round your answer to two decimal places.
%
Debt
Preferred stock
Common stock
$137,500
82,500
330,000
d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places.
%
c. What is the cost of common stock? Assume that the current $0.70 dividend grows by 7 percent during the year. Round your answer to two decimal places.
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d1282c1-8c68-462d-9f98-98ae0716818d%2F5f9623b8-b6f0-430b-a2ce-5dea87fdee80%2Fx85ize9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:HBM, Inc has the following capital structure:
Assets $550,000
a. What is the after-tax cost of debt? Round your answer to two decimal places.
%
The common stock is currently selling for $14 a share, pays a cash dividend of $0.70 per share, and is growing annually at 7 percent. The preferred stock pays a $6 cash dividend and currently sells for $86 a share. The debt pays
interest of 8.0 percent annually, and the firm is in the 30 percent marginal tax bracket.
b. What is the cost of preferred stock? Round your answer to two decimal places.
%
Debt
Preferred stock
Common stock
$137,500
82,500
330,000
d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places.
%
c. What is the cost of common stock? Assume that the current $0.70 dividend grows by 7 percent during the year. Round your answer to two decimal places.
%
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