Foundations Of Finance
Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 9, Problem 11SP

a)

Summary Introduction

To determine: The after tax cost of debt.

b)

Summary Introduction

To determine: The cost of preferred stock.

c)

Summary Introduction

To determine: The cost of common stock.

d)

Summary Introduction

To determine: The cost of new issued common stock.

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(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.1 percent. Interest payments are $50.50 and are paid semiannually. The bonds have a current market value of $1,122 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.85 dividend last year. The firm's dividends are expected to continue to grow at 7.8 percent per year, forever. The price of the firm's common stock is now $27.25. c. A preferred stock that sells for $150, pays a dividend of 8.8 percent, and has a $100 par value. d. A bond selling to yield 11.8 percent where the firm's tax rate is 34 percent. a. The after-tax cost of debt is %. (Round to two decimal places.)
MAGGIE LTD Q&S (Computing individual or component costs of capital) Compute the cost of capital foreach of the following sources of financing: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rateof 12 percent. Interest payments are $120 and are paid semiannually. The bond hasa current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percent. b. A new common stock issue by a firm that paid a $1.75 dividend last year. The firm's dividends are expected to continue to grow at 8 percent per year forever. The price ofthe firm's common stock is now $28.00. c. A preferred stock that sells for $150, pays a 10 percent annual dividend, and has a $125 par value. d. A bond whose yield to maturity (based on the bond's market price) is 13 percentwhere the firm's tax rate is 34 percent. Identify the features and working formula for this question as per below (add if there's more): - Par Value = Coupon rate = Interest payments =…
​(Individual or component costs of​ capital)   Compute the cost of capital for the firm for the​ following: a.  A bond that has a ​$1,000 par value​ (face value) and a contract or coupon interest rate of 11.0 percent. Interest payments are ​$55.00 and are paid semiannually. The bonds have a current market value of ​$1,125 and will mature in 10 years. The​ firm's marginal tax rate is 34 percent.b.  A new common stock issue that paid a ​$1.80 dividend last year. The​ firm's dividends are expected to continue to grow at 7.0 percent per​ year, forever. The price of the​ firm's common stock is now ​$27.50.c.  A preferred stock that sells for ​$125​, pays a dividend of 9.0 ​percent, and has a​ $100 par value.  d.  A bond selling to yield 12.0 percent where the​ firm's tax rate is 34 percent. a.    The​ after-tax cost of debt is      ​%. ​(Round to two decimal​ places.)b.    The cost of common equity is   ​%. ​(Round to two decimal​ places.)c.  The cost of preferred stock is    ​%. ​(Round to…
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Discounted cash flow model; Author: Edspira;https://www.youtube.com/watch?v=7PpWneOBJls;License: Standard YouTube License, CC-BY