Problem 21-01 HBM, Inc has the following capital structure: Assets $450,000 Debt Preferred stock Common stock $180,000 22,500 247,500 The common stock is currently selling for $15 a share, pays a cash dividend of $0.85 per share, and is growing annually at 4 percent. The preferred stock pays a $5 cash dividend and currently sells for $92 a share. The debt pays interest of 8.5 percent annually, and the firm is in the 30 percent marginal tax bracket. a. What is the after-tax cost of debt? Round your answer to two decimal places. % b. What is the cost of preferred stock? Round your answer to two decimal places. % c. What is the cost of common stock? Assume that the current $0.85 dividend grows by 4 percent during the year. Round your answer to two decimal places. % d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places. %
Problem 21-01 HBM, Inc has the following capital structure: Assets $450,000 Debt Preferred stock Common stock $180,000 22,500 247,500 The common stock is currently selling for $15 a share, pays a cash dividend of $0.85 per share, and is growing annually at 4 percent. The preferred stock pays a $5 cash dividend and currently sells for $92 a share. The debt pays interest of 8.5 percent annually, and the firm is in the 30 percent marginal tax bracket. a. What is the after-tax cost of debt? Round your answer to two decimal places. % b. What is the cost of preferred stock? Round your answer to two decimal places. % c. What is the cost of common stock? Assume that the current $0.85 dividend grows by 4 percent during the year. Round your answer to two decimal places. % d. What is the firm's weighted-average cost of capital? Round your answer to two decimal places. %
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter13: Capital Structure And Leverage
Section: Chapter Questions
Problem 11P: RECAPITALIZATION Currently, Forever flowers Inc. has a capital structure consisting of 25% debt and...
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