The following was collected with regards to Blue Co.: · The capital structure is 60% equity funded. · The company anticipates that it will need to raise new ordinary shares for this year. Total flotation costs will be equal to the 7.5% of the amount issued. · The yield to maturity of the company’s bonds is 9%. · Applicable tax rate is 30%. · The year-end dividend is forecasted to be P0.25 per share. · The firm expects that its dividend will grow yearly at a constant rate of 3%. · The company’s ordinary share price is P32. What is the weighted cost of debt?
The following was collected with regards to Blue Co.: · The capital structure is 60% equity funded. · The company anticipates that it will need to raise new ordinary shares for this year. Total flotation costs will be equal to the 7.5% of the amount issued. · The yield to maturity of the company’s bonds is 9%. · Applicable tax rate is 30%. · The year-end dividend is forecasted to be P0.25 per share. · The firm expects that its dividend will grow yearly at a constant rate of 3%. · The company’s ordinary share price is P32. What is the weighted cost of debt?
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 following was collected with regards to Blue Co.:
· The capital structure is 60% equity funded.
· The company anticipates that it will need to raise new ordinary shares for this year. Total flotation costs will be equal to the 7.5% of the amount issued.
· The yield to maturity of the company’s bonds is 9%.
· Applicable tax rate is 30%.
· The year-end dividend is
· The firm expects that its dividend will grow yearly at a constant rate of 3%.
· The company’s ordinary share price is P32.
What is the weighted cost of debt?
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