The capital structure for Jebat Sdn Bhd is provided here: Capital structure RM’000 Bond 8,000 Preferred stock 5,000 Common stock 7,000 The firm is in a 30% tax bracket and plans to maintain the above capital structure in the future. The firms have a bond with RM1,000 par value, coupon interest rate of 12% and the floatation cost of 4% of the RM1,350 market price. The bond matures in 10 years. The preferred stock paying a RM10 dividend. If a new issue is offered, floatation cost will be 14% of the current price of RM195. The common stock price is RM32.80. The company’s executive anticipates a dividend constant growth rate of 7% and dividend for last year was RM2.80. If new stock is issue, RM12 will be charged as floatation cost. a. Calculate the individual cost of capital for the above capital structure.
The capital structure for Jebat Sdn Bhd is provided here: Capital structure RM’000 Bond 8,000 Preferred stock 5,000 Common stock 7,000 The firm is in a 30% tax bracket and plans to maintain the above capital structure in the future. The firms have a bond with RM1,000 par value, coupon interest rate of 12% and the floatation cost of 4% of the RM1,350 market price. The bond matures in 10 years. The preferred stock paying a RM10 dividend. If a new issue is offered, floatation cost will be 14% of the current price of RM195. The common stock price is RM32.80. The company’s executive anticipates a dividend constant growth rate of 7% and dividend for last year was RM2.80. If new stock is issue, RM12 will be charged as floatation cost. a. Calculate the individual cost of capital for the above capital structure.
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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The capital structure for Jebat Sdn Bhd is provided here:
Capital structure RM’000
Bond 8,000
Preferred stock 5,000
Common stock 7,000
The firm is in a 30% tax bracket and plans to maintain the above capital structure in the future. The firms have a bond with RM1,000 par value, coupon interest rate of 12% and the floatation cost of 4% of the RM1,350 market price. The bond matures in 10 years.
The preferred stock paying a RM10 dividend. If a new issue is offered, floatation cost will be 14% of the current price of RM195.
The common stock price is RM32.80. The company’s executive anticipates a dividend constant growth rate of 7% and dividend for last year was RM2.80. If new stock is issue, RM12 will be charged as floatation cost.
a. Calculate the individual cost of capital for the above capital structure.
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