The capital for investment of Executive Consultants, Inc. is as follows: Sources of capital Capital Debt (corporate bonds) $4,100,000 Prefferent shares $2,200,000 Common shares $2,800,000 B. To generate the $ 4.1 million of corporate bond capital, they issued bonds at $ 965 par value, with an annual coupon of $ 100 for the next 10 years, with a flotation cost of $ 10 per bond. C. The issue of preferred shares has a cost of $ 5 per share and will pay a dividend of 10% of its par value of $ 110 per preferred share. D. The risk-free rate is 3.45% and the market return is 11.25%. The company's beta coefficient is 1.23. E. Executive Consultants, Inc. has a tax liability of 35%. Problems: You must submit the procedure and all the calculations. 1. Determine the capital structure of Executive Consultants, Inc. 2. Calculate the cost of debt after taxes. 3. Calculate the cost of preferred equity.
Weighted average cost of capital
A. The capital for investment of Executive Consultants, Inc. is as follows:
|
Sources of capital |
Capital |
|
Debt (corporate bonds) |
$4,100,000 |
|
Prefferent shares |
$2,200,000 |
|
Common shares |
$2,800,000 |
B. To generate the $ 4.1 million of corporate bond capital, they issued bonds at $ 965 par value, with an annual coupon of $ 100 for the next 10 years, with a flotation cost of $ 10 per bond.
C. The issue of
D. The risk-free rate is 3.45% and the market return is 11.25%. The company's beta coefficient is 1.23.
E. Executive Consultants, Inc. has a tax liability of 35%.
Problems:
You must submit the procedure and all the calculations.
1. Determine the capital structure of Executive Consultants, Inc.
2. Calculate the cost of debt after taxes.
3. Calculate the
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