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(part A is correct, I just need help with B, C, D, and E) A. Calculate the Weights for debt, common equity, and preferred equity. (round final answers to 4 decimal places) Debt: 0.4 (correct) Preferred Equity: 0.04 (correct) Common Equity: 0.56 (correct) B. Calculate the cost of debt % C. Calculate the cost of preferred equity %  D. calculate the cost of common equity % E. What is the firms weighted average cost of capital (WACC)%

(part A is correct, I just need help with B, C, D, and E) A. Calculate the Weights for debt, common equity, and preferred equity. (round final answers to 4 decimal places) Debt: 0.4 (correct) Preferred Equity: 0.04 (correct) Common Equity: 0.56 (correct) B. Calculate the cost of debt % C. Calculate the cost of preferred equity %  D. calculate the cost of common equity % E. What is the firms weighted average cost of capital (WACC)%

Essentials Of Investments
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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(part A is correct, I just need help with B, C, D, and E)

A. Calculate the Weights for debt, common equity, and preferred equity. (round final answers to 4 decimal places)

Debt: 0.4 (correct)

Preferred Equity: 0.04 (correct)

Common Equity: 0.56 (correct)

B. Calculate the cost of debt %

C. Calculate the cost of preferred equity % 

D. calculate the cost of common equity %

E. What is the firms weighted average cost of capital (WACC)%

The Blossom Products Co. currently has debt with a market value of $200 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) that have a maturity of 15 years and are currently priced at $1,445.45 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $10.00 per share. The preferred shares pay an annual dividend of $1.20. Blossom also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 4 percent per year forever. If Blossom is subject to a 28 percent marginal tax rate. Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.)
Transcribed Image Text:The Blossom Products Co. currently has debt with a market value of $200 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) that have a maturity of 15 years and are currently priced at $1,445.45 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $10.00 per share. The preferred shares pay an annual dividend of $1.20. Blossom also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 4 percent per year forever. If Blossom is subject to a 28 percent marginal tax rate. Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.)
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