Ross Inc. has a target capital structure that calls for 25% debt, 15% preferred stock and...
Ross Inc. has a target capital structure that calls for 25% debt, 15% preferred stock and 60% common equity. The company has 25 year maturity, 7% semi-annual coupon bonds outstanding currently selling at $1,105.23. Currently, common and preferred equity in Ross is trading for $22.50 and $104.00, respectively. Ross is a relatively safe investment with a beta of 0.58 and it expects to retain $2.37 million in earnings over the coming year. Also, they are a dividend paying company, having just paid a $1.40 dividend and that is expected to grow at 2% per year; their preferred pays a dividend of 7.25% based on $100 par value. Floatation costs of 8% and 15% would have to be paid to issue new shares of preferred and common stock, respectively. The corporation is taxed at a 28% rate. Investors can invest risk free earning 2%, while investing in the market is expected to earn 14%
(a) What is the cost of newly issued common stock? The flotation
premium? What’s re?
Homework Answers
Add Answer to:
Ross Inc. has a target capital structure that calls for 25%
debt, 15% preferred stock and...
Premier Inc. has just determined its target capital structure: 40% debt, 10% preferred stock, and 50%...
Premier Inc. has just determined its target capital structure: 40% debt, 10% preferred stock, and 50% common stock. Its 10% coupon, paid semiannually, 20-year bonds are currently yielding around 8% Premier is planning to issue new preferred stock at par, $100, paying 10% annual dividend. The flotation cost associated with the new issue is 5%. Premier just paid a dividend of $1, which has a constant growth rate of 5%. The firm's common stock is currently selling for $20, with...
show work please! Kuhn Co. has a target capital structure of 35% debt, 2% preferred stock,...
show work please!
Kuhn Co. has a target capital structure of 35% debt, 2% preferred stock, and 63% common equity. The tax rate is 40% The yield to maturity on the new bonds is 8.7%. Its cost of preferred stock is 8.67% and its cost of retained earnings is 20%. • If the firm have to issue new common stock, its common stock is currently selling for $22.35 per share, and it just paid a dividend of $2.55. Floatation costs...
Given the following information: Percent of capital structure: points Debt Preferred stock Common equity 30% 15...
Given the following information: Percent of capital structure: points Debt Preferred stock Common equity 30% 15 eBook Additional information: Hint Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 10% 8% $ 4.00 $ 11.00 $ 55.00 $ 104.00 $ 5.50 Print 7% References 30% Calculate the Hamilton Corp.'s weighted cost of each source of capital and the weighted average cost of capital. (Do not...
Vandelay Industries has a target capital structure consisting of 30% debt, 10% preferred stock, and 60%...
Vandelay Industries has a target capital structure consisting of 30% debt, 10% preferred stock, and 60% common equity. Vandelay has 20-year, 12% semiannual coupon bonds that sell at their par value of $1,000. The component cost of preferred stock is 12.6%. Vandelay is a constant growth firm with plans to pay a dividend of $2.10, sells for $27.00 per share, and has a growth rate of 8%. Flotation costs on new common stock are 10%, and the firm's marginal tax...
source of capital Target market proportions long term debt 20% preffered stock 10 common stock equity...
source of capital Target market proportions long term debt 20% preffered stock 10 common stock equity 70 A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Debt: The firm can sell a 12-year, $1,000 par value, 7 percent semiannual coupon bond for $950. A flotation cost of 2 percent of the face value would be required. Note: Floatation cost only occurs if new security needs to be offered. Preferred...
Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with...
Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 12%, and its marginal tax rate is 25%. The current stock price is P0 = $32.50. The last dividend was D0 = $2.00, and it is expected to grow at an 8% constant rate. What is its cost of common equity and its WACC? rs = WACC = Banyan Co.’s common stock currently sells for...
Given the following information: Percent of capital structure: 25% Preferred stock Common equity (retained earnings) Debt...
Given the following information: Percent of capital structure: 25% Preferred stock Common equity (retained earnings) Debt 30 45 Additional information: 34% $ 6.00 $ 3.50 $ 96.00 Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 4% $10.20 $81.00 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt Preferred...
10.08 10.09 Palencia Paints Corporation has a target capital structure of 40% debt and 60% common...
10.08
10.09
Palencia Paints Corporation has a target capital structure of 40% debt and 60% common equity, with no preferred stock. Its before-tax cost of debt is 13%, and its marginal tax rate is 25%. The current stock price is Po = $30.00. The last dividend was Do = $3.50, and it is expected to grow at a 7% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to...
Turnbull Co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common...
Turnbull Co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common equity. It has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%. If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 14.7%. However, if it is necessary to raise new common equity, it will carry a cost of 16.8%. A) If its current tax rate is 40%, how...
Given the following information: Percent of capital structure Preferred stock Common equity (retained earnings) Debt 25%...
Given the following information: Percent of capital structure Preferred stock Common equity (retained earnings) Debt 25% 35 40 eBook Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate 30% 12.00 $ 7.50 $95.00 10% 12% Bond yield Flotation cost, preferred Price, common $ 8.50 80.00 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt...
show work please!
Kuhn Co. has a target capital structure of 35% debt, 2% preferred stock, and 63% common equity. The tax rate is 40% The yield to maturity on the new bonds is 8.7%. Its cost of preferred stock is 8.67% and its cost of retained earnings is 20%. • If the firm have to issue new common stock, its common stock is currently selling for $22.35 per share, and it just paid a dividend of $2.55. Floatation costs...
Given the following information: Percent of capital structure: points Debt Preferred stock Common equity 30% 15 eBook Additional information: Hint Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 10% 8% $ 4.00 $ 11.00 $ 55.00 $ 104.00 $ 5.50 Print 7% References 30% Calculate the Hamilton Corp.'s weighted cost of each source of capital and the weighted average cost of capital. (Do not...
Given the following information: Percent of capital structure: 25% Preferred stock Common equity (retained earnings) Debt 30 45 Additional information: 34% $ 6.00 $ 3.50 $ 96.00 Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 4% $10.20 $81.00 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt Preferred...
10.08
10.09
Palencia Paints Corporation has a target capital structure of 40% debt and 60% common equity, with no preferred stock. Its before-tax cost of debt is 13%, and its marginal tax rate is 25%. The current stock price is Po = $30.00. The last dividend was Do = $3.50, and it is expected to grow at a 7% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to...
Given the following information: Percent of capital structure Preferred stock Common equity (retained earnings) Debt 25% 35 40 eBook Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate 30% 12.00 $ 7.50 $95.00 10% 12% Bond yield Flotation cost, preferred Price, common $ 8.50 80.00 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt...
Most questions answered within 3 hours.
-
Define the following concepts in your own words: (a) stiffness,
(b) strength, (c) strain,
(d) ductility,...
asked 16 minutes ago -
In C++
In this homework, you will be tasked with creating functions to
manipulate strings that...
asked 42 minutes ago -
An isolated colony represents a pure culture. one rare occasions
, however , a colony can...
asked 56 minutes ago -
*****DO NOT ANSWER THIS QUESTION IF YOU DON'T
KNOW*******Rights and Duties of Auditors; Minimum 4000
words...
asked 1 hour ago -
The probability that Janie is wearing sunglasses is 1/4. The
probability that she is wearing sunglasses...
asked 2 hours ago -
Do you believe social media is more of a help or a hindrance in
controlling crises...
asked 2 hours ago -
Two long, parallel wires separated by 2.85 cm carry currents in
opposite directions. The current in...
asked 2 hours ago -
Question # 1. Develop a list of rehabilitation journals
that publish articles concerning career counseling for...
asked 2 hours ago -
Bryant Company has a factory machine with a book value of
$85,100 and a remaining useful...
asked 2 hours ago -
What is the default classification for federal tax purposes of a
U.S. eligible entity with one...
asked 2 hours ago -
1. How many grams would 4.0x1021 atoms of calcium
weigh?
2.. Calculate the percent oxygen in...
asked 2 hours ago -
Balance Equation
K2Cr2O7 + H2C2O4 2H2O 6 K[Cr(C2O4 )2 (H2O)2 ]2H2O + CO2 +
H2O
asked 2 hours ago