(Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, 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 11.2 percent that is paid semiannually. The bond is currently selling for a price of $1,124 and will mature in 10 years. The firm's tax rate is 34 percent. b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company? c. A new common stock issue that paid a $1.75 dividend last year. The par value of the stock is $16, and the firm's dividends per share have grown at a rate of 8.1 percent per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now $28.08. d. A preferred stock paying a 9.4 percent dividend on a $126 par value. The preferred shares are currently selling for $152.43. e. A bond selling to yield 13.5 percent for the purchaser of the bond. The borrowing firm faces a tax rate of 34 percent. a. The after-tax cost of debt from the firm is %. (Round to two decimal places.)

(Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, 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 11.2 percent that is paid semiannually. The bond is currently selling for a price of $1,124 and will mature in 10 years. The firm's tax rate is 34 percent. b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company? c. A new common stock issue that paid a $1.75 dividend last year. The par value of the stock is $16, and the firm's dividends per share have grown at a rate of 8.1 percent per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now $28.08. d. A preferred stock paying a 9.4 percent dividend on a $126 par value. The preferred shares are currently selling for $152.43. e. A bond selling to yield 13.5 percent for the purchaser of the bond. The borrowing firm faces a tax rate of 34 percent. a. The after-tax cost of debt from the firm is %. (Round 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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Find v in question c and find c in question d
Bumgardner Incorporated has provided the following data concerning one of the products in its standard cost system. Inputs Direct materials Standard Quantity or Hours per Unit of Output 8.0 liters Standard Price or Rate $ 5.00 per liter The company has reported the following actual results for the product for April: Actual output Raw materials purchased 7,400 units 65,400 liters $ 5.70 per liter 59,210 liters Actual price of raw materials Raw materials used in production The raw materials price variance for the month is closest to: (Round your intermediate calculations to 2 decimal places.)
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E x p l a i n t h e l i m i t a t i o n s o f b r e a k e v e n a n a l y s i s.

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