Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $5,000,000 last...
Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $5,000,000 last year. From those earnings, the company paid a dividend of
$1.28 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 25%debt, 10% preferred stock, and 65% common stock. It is taxed at a rate of
40%.
a. If the market price of the common stock is $36 and dividends are expected to grow at a rate of 7%per year for the foreseeable future, what is the company's cost of retained earnings financing?
b. If underpricing and flotation costs on new shares of common stock amount to $8 per share, what is the company's cost of new common stock financing?
c. The company can issue $1.82 dividend preferred stock for a market price of $29 per share. Flotation costs would amount to $6 per share. What is the cost of preferred stock financing?
d. The company can issue $1,000 -par-value,12%coupon, 7 -year bonds that can be sold for
$1,170 each. Flotation costs would amount to $25 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing?
e. What is the WACC ?
Round answers to two decimal places
Homework Answers
Add Answer to:
Cost of capital Edna Recording Studios, Inc.,
reported earnings available to common stock of $5,000,000 last...
Cost of capital Edna Recording Studios Inc. reported earnings available to common stock of $4,200,000 last...
Cost of capital Edna Recording Studios Inc. reported earnings available to common stock of $4,200,000 last year. From those earnings, the company paid a dividend of $1.26 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 40% debt, 10% preferred stock, and 50% common stock. It is taxed at a rate of 21%. If the market price of the common stock is $40 and dividends are expected to grow at a rate of 6%...
Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,4...
This is a sample question:
Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last year. From those earnings, the company paid a dividend of $1.19 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35% debt, 25% preferred stock, and 40% common stock. t is taxed at a rate of 27%. a. If the market price of the common stock is $31 and dividends are expected to...
9-16 Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,000,000...
9-16 Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,000,000 last year. From those earnings, the company paid a dividend of $1.32 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35% debt, 25% preferred stock, and 40% common stock. It is taxed at a rate of 23%. a. If the market price of the common stock is $35 and dividends are expected to grow at a rate...
Edna Recording Studios, Inc., reported earnings available to common stock of $4 ,400,000 last year. From...
Edna Recording Studios, Inc., reported earnings available to common stock of $4 ,400,000 last year. From those earnings, the company paid a dividend of $1.26 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 25% preferred stock, and 45% common stock. It is taxed at a rate of 21%. a. If the market price of the common stock is $43 and dividends are expected to grow at a rate of 6% per...
Cost of capital Edra Recording Studios, Inc., reported earnings available to common stock of S4 400.000...
Cost of capital Edra Recording Studios, Inc., reported earnings available to common stock of S4 400.000 last year. From those earnings, the company paid a dividend of $1.32 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 10% proferred stock, and 60% common stock. It is taxed at a rate of 28% a. "the market price of the common stock is $32 and dividends are expected to grow at a rate of...
Edna Recording Studios, Inc., reported earnings available to common stock of $4200000 last year. From these...
Edna Recording Studios, Inc., reported earnings available to common stock of $4200000 last year. From these earnings, the company paid a dividend of $1.26 on each of its 1000000 common shares outstanding. The capital structure of the company includes 40% debt, 10% preferred stock, and 50% common stock. It is taxed at a rate of 40%. The company currently has $1000-par-value, 10% coupon, 5-year bonds that can be sold for $1175 each. What is the after tax cost of debt...
QUESTION 2: Dover Port Terminal reported after-tax earnings available to common stockholders of $6,400,000. From these...
QUESTION 2: Dover Port Terminal reported after-tax earnings available to common stockholders of $6,400,000. From these earnings, Dover paid a dividend of $0.50 on each of its 6,000,000 common shares outstanding. The company has determined its optimal capital structure which is composed of the following sources and target market value proportions. Source of Capital Target Market Proportion Long-Term Debt 60% Common Stock 40% Debt: Dover can issue $1,000 par value, 8% coupon (with interest paid annually), 10-year bonds that can...
GB Timbers, based in Germany, supplies timber products to construction and manufacturing industries. The company reported...
GB Timbers, based in Germany, supplies timber products to construction and manufacturing industries. The company reported after-tax earnings available to common stocks of RM3,200,000. From these eamings, the management decided to pay a dividend of RM0.80 on each of its 4,000,000 common shares outstanding. The capital structurë of the company includes 30% debt, 40% common stock, end 30% preferred stock. The tax rate applicable to GB Timbers is 30%. i) If the market price of the common stock is RM3.60,)...
Firms that carry preferred stock in their capital mix want to not only distribute dividends to common stockholders but...
Firms that carry preferred stock in their capital mix want to not only distribute dividends to common stockholders but also maintain credibility in the capital markets so that they can raise additional funds in the future and avoid potential corporate raids from preferred stockholders. Consider the case of Red Oyster Seafood Company: Ten years ago, Red Oyster Seafood Company issued a perpetual preferred stock issue-called PS Alpha-that pays a fixed dividend of $8.50 per share and currently sells for $100...
Ameristar, Inc. can obtain funds for future investments through retained earnings, new issues of common stock,...
Ameristar, Inc. can obtain funds for future investments through retained earnings, new issues of common stock, issuance of debt, and issuance of preferred stock. The Board of Directors believe an appropriate capital structure is one where funds are acquired in the following mix: 30% debt, 10% preferred stock, and 60% common stock. New issuance or flotation costs for the issuance of new securities amount to 3% for debt, 5% for preferred stock, and 10% for common stock. Ameristar has $180...
This is a sample question:
Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,400,000 last year. From those earnings, the company paid a dividend of $1.19 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35% debt, 25% preferred stock, and 40% common stock. t is taxed at a rate of 27%. a. If the market price of the common stock is $31 and dividends are expected to...
Cost of capital Edra Recording Studios, Inc., reported earnings available to common stock of S4 400.000 last year. From those earnings, the company paid a dividend of $1.32 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 10% proferred stock, and 60% common stock. It is taxed at a rate of 28% a. "the market price of the common stock is $32 and dividends are expected to grow at a rate of...
QUESTION 2: Dover Port Terminal reported after-tax earnings available to common stockholders of $6,400,000. From these earnings, Dover paid a dividend of $0.50 on each of its 6,000,000 common shares outstanding. The company has determined its optimal capital structure which is composed of the following sources and target market value proportions. Source of Capital Target Market Proportion Long-Term Debt 60% Common Stock 40% Debt: Dover can issue $1,000 par value, 8% coupon (with interest paid annually), 10-year bonds that can...
Firms that carry preferred stock in their capital mix want to not only distribute dividends to common stockholders but also maintain credibility in the capital markets so that they can raise additional funds in the future and avoid potential corporate raids from preferred stockholders. Consider the case of Red Oyster Seafood Company: Ten years ago, Red Oyster Seafood Company issued a perpetual preferred stock issue-called PS Alpha-that pays a fixed dividend of $8.50 per share and currently sells for $100...
Most questions answered within 3 hours.
-
Executive Program Practical Connection Assignment
Subject : Operations Security.
Assignment:
Provide a reflection of at least...
asked 4 minutes ago -
Every time Casey is at bat he has a 0.4 probability of
getting on base (assume...
asked 12 minutes ago -
The Walston Company is to be liquidated and has the following
liabilities:
Income taxes
$
9,400...
asked 19 minutes ago -
If
the more comprehensive data is available in MEPS, why does the NHIS
still exist? How...
asked 41 minutes ago -
Koo argues that the Japanese economy in the 1990s suffered from
a balance sheet recession. What...
asked 34 minutes ago -
Automobile mechanics conduct diagnosis tests on 150 new cars of
particular make and model to determine...
asked 28 minutes ago -
11) Find the proceeds of a 5 year non-interest
bearing note for $6500 discounted 2.5 years...
asked 35 minutes ago -
Required: Prepare the consolidated financial statements of
Griffin Ltd at 30 June 2019.
Griffin Ltd is...
asked 44 minutes ago -
1.How large must the coefficient of static friction be between
the tires and the road if...
asked 59 minutes ago -
What is the time complexity (Big-O) of the following code?
class Main
{
// Recursive...
asked 59 minutes ago -
Economists look at any situation in terms of its component
parts: the people making decisions, the...
asked 1 hour ago -
What is a population?
Select one:
a. All of the individual organisms belonging to the same...
asked 1 hour ago