HBM, Inc has the following capital structure: Assets $ 350,000 Debt $ 87,500 Preferred stock 17,500 Common stock 245,000 The common stock is currently selling for $17 a share, pays a cash dividend of $0.80 per share, and is growing annually at 8 percent. The preferred stock pays a $9 cash dividend and currently sells for $100 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt? Round your answer to two decimal places. % What is the cost of preferred stock? Round your answer to two decimal places. % What is the cost of common stock? Assume that the current $0.80 dividend grows by 8 percent during the year. Round your answer to two decimal places. % 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 $ 350,000 Debt $ 87,500 Preferred stock 17,500 Common stock 245,000 The common stock is currently selling for $17 a share, pays a cash dividend of $0.80 per share, and is growing annually at 8 percent. The preferred stock pays a $9 cash dividend and currently sells for $100 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt? Round your answer to two decimal places. % What is the cost of preferred stock? Round your answer to two decimal places. % What is the cost of common stock? Assume that the current $0.80 dividend grows by 8 percent during the year. Round your answer to two decimal places. % What is the firm’s weighted-average cost of capital? Round your answer to two decimal places. %
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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Question
HBM, Inc has the following capital structure:
| Assets | $ | 350,000 | Debt | $ | 87,500 | |
| 17,500 | ||||||
| Common stock | 245,000 |
The common stock is currently selling for $17 a share, pays a cash dividend of $0.80 per share, and is growing annually at 8 percent. The preferred stock pays a $9 cash dividend and currently sells for $100 a share. The debt pays interest of 7.0 percent annually, and the firm is in the 30 percent marginal tax bracket.
- What is the after-tax cost of debt? Round your answer to two decimal places.
%
- What is the cost of preferred stock? Round your answer to two decimal places.
%
- What is the cost of common stock? Assume that the current $0.80 dividend grows by 8 percent during the year. Round your answer to two decimal places.
%
- What is the firm’s weighted-average cost of capital? Round your answer to two decimal places.
%
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