Long-term liabilities - cost of capital A Kókò has determined its optimal structure which is composed of the following sources and target market val'ue proportions. Source of Capital Target Market Proportions 60% Long-term debt Common stock equity 40 Debt: The Kòkò can sell a 15-year, P1,000 par value, 8 percent bond for P1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of P50. Common Stock: A Kòkò's common stock is currently selling for P75 per share. The dividend expected to be paid at the end of the coming year is P5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was P3.10. It is expected that to sell, a new coramon stock issue must be underpriced P2 per share and the Kòkò must pay P1 per share in fletation costs. Additionally, the Kòkò has a marginal tax rate of 40 percent.

Long-term liabilities - cost of capital A Kókò has determined its optimal structure which is composed of the following sources and target market val'ue proportions. Source of Capital Target Market Proportions 60% Long-term debt Common stock equity 40 Debt: The Kòkò can sell a 15-year, P1,000 par value, 8 percent bond for P1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of P50. Common Stock: A Kòkò's common stock is currently selling for P75 per share. The dividend expected to be paid at the end of the coming year is P5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was P3.10. It is expected that to sell, a new coramon stock issue must be underpriced P2 per share and the Kòkò must pay P1 per share in fletation costs. Additionally, the Kòkò has a marginal tax rate of 40 percent.

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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