You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long- term capital. Continue with the values and assumptions outlined above. The company's marginal tax rate is 28%. First, there are 6,500,000 shares of common stock, which are currently selling for $153.12. You estimate that the Beta of the firm's stock is 1.20 and that the long-term return on the stock market will be 9%. The current yield on Treasury Bills is 3.50%. Second, there are 6,000,000 shares of preferred stock outstanding that pay a perpetual (annual) dividend of $3.85, and are currently selling for $52.04. Third, there is an issue of 460,000 coupon bonds with a face value of $1,000, which pays 6.35% (annual) coupons, and mature in twenty-three years. These bonds are currently trading for $1,182.10. What is the weight of the firm's market value of assets held by the common stock holders? (The answer is a percent, round your answer to two decimal places, e.g. 22.75) Numeric Response
You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long- term capital. Continue with the values and assumptions outlined above. The company's marginal tax rate is 28%. First, there are 6,500,000 shares of common stock, which are currently selling for $153.12. You estimate that the Beta of the firm's stock is 1.20 and that the long-term return on the stock market will be 9%. The current yield on Treasury Bills is 3.50%. Second, there are 6,000,000 shares of preferred stock outstanding that pay a perpetual (annual) dividend of $3.85, and are currently selling for $52.04. Third, there is an issue of 460,000 coupon bonds with a face value of $1,000, which pays 6.35% (annual) coupons, and mature in twenty-three years. These bonds are currently trading for $1,182.10. What is the weight of the firm's market value of assets held by the common stock holders? (The answer is a percent, round your answer to two decimal places, e.g. 22.75) Numeric Response
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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Concept explainers
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Question
Transcribed Image Text:You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long-
term capital. Continue with the values and assumptions outlined above. The company's marginal tax rate is 28%.
First, there are 6,500,000 shares of common stock, which are currently selling for $153.12. You estimate that the Beta of
the firm's stock is 1.20 and that the long-term return on the stock market will be 9%. The current yield on Treasury Bills is
3.50%.
Second, there are 6,000,000 shares of preferred stock outstanding that pay a perpetual (annual) dividend of $3.85, and
are currently selling for $52.04.
Third, there is an issue of 460,000 coupon bonds with a face value of $1,000, which pays 6.35% (annual) coupons, and
mature in twenty-three years. These bonds are currently trading for $1,182.10.
What is the weight of the firm's market value of assets held by the common stock holders? (The answer is a percent,
round your answer to two decimal places, e.g. 22.75)
Numeric Response
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