Q No.2 A company has issued 10 year bond a year ago at par value with a coupon rate of 9%, paid annually. Today the bond is selling at 1150. Firm is in the tax bracket of 40%. Company has preferred stock on which dividend is fixed $ 4 and market price of preferred stock is $ 45. Company issued common stock, dividend currently paid $2 which is expected to grow at a rate of 4% and stock is selling at $ 25. If company is planning to invest in a project at a ratio of 40:20:40. What should be weighted average cost of capital of this project?
Q No.2 A company has issued 10 year bond a year ago at par value with a coupon rate of 9%, paid annually. Today the bond is selling at 1150. Firm is in the tax bracket of 40%. Company has preferred stock on which dividend is fixed $ 4 and market price of preferred stock is $ 45. Company issued common stock, dividend currently paid $2 which is expected to grow at a rate of 4% and stock is selling at $ 25. If company is planning to invest in a project at a ratio of 40:20:40. What should be weighted average cost of capital of this project?
Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
Problem 6P
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Q No.2
A company has issued 10 year bond a year ago at par value with a coupon rate of 9%, paid annually. Today the bond is selling at 1150. Firm is in the tax bracket of 40%. Company has
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