Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate Dividend, preferred 15% 45 40 35% $ 10.00 Dividend, expected common $ 5.50 Price, preferred $ 98.00 Growth rate Bond yield 10% 11% Flotation cost, preferred $ 8.20 $ 77.00 Price, common Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate Dividend, preferred 15% 45 40 35% $ 10.00 Dividend, expected common $ 5.50 Price, preferred $ 98.00 Growth rate Bond yield 10% 11% Flotation cost, preferred $ 8.20 $ 77.00 Price, common Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 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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Transcribed Image Text:Percent of capital structure:
Preferred stock
Common equity (retained earnings)
Debt
Additional information:
Corporate tax rate
Dividend, preferred
15%
45
40
35%
$ 10.00
Dividend, expected common
$ 5.50
Price, preferred
$ 98.00
Growth rate
10%
Bond yield
11%
Flotation cost, preferred
$ 8.20
$ 77.00
Price, common
Calculate the weighted average cost of capital for Digital Processing Incorporated
Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.
Answer is complete but not entirely correct.
Debt
Preferred stock
Common equity (retained earnings)
Weighted average cost of capital
Weighted Cost
7.15
11.14 X
%
7.86
26.15
%
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