preferred stock with a dividend of $11.00 can be sold to the public at a price of $95.00 per share. (2) Debt can be sold at an interest rate of 12%. 1. Determine the after-tax cost of debt. 2. Calculate the cost of preferred stock. 3. Compute for the cost of common equity. 4. Calculate the WACC. 5. Suppose FinD has five independent projects as investment opportunities with the following costs and rates of return: (A) 17.4%; (B) 16.0%; (C) 14.2%; (D) 13.2%; and (E) 12%. Assuming FinD does not want to issue new common stocks, which projects should FinD accept? Why? Ps: pls answer number 4 and 5 only. Thank you
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
The management of Final Designs, Inc., or FinD, has decided that the optimal capital structure for
their company would be: 25% debt, 15%
FinD’s federal-plus-state tax rate is 40%, and investors expect future earnings and dividends to grow
at a constant rate of 9%. FinD paid a dividend of $3.60 per share last year, and its stock currently sells
for $54.00 per share. FinD can obtain new capital in the following ways: (1) New preferred stock with
a dividend of $11.00 can be sold to the public at a price of $95.00 per share. (2) Debt can be sold at
an interest rate of 12%.
1. Determine the after-tax cost of debt.
2. Calculate the cost of preferred stock.
3. Compute for the
4. Calculate the WACC.
5. Suppose FinD has five independent projects as investment opportunities with the following
costs and
FinD does not want to issue new common stocks, which projects should FinD accept? Why?
Ps: pls answer number 4 and 5 only. Thank you
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