Cde company currently has a rate on preffered stock of 6.35% and a ytm on debt...
Homework Answers
cost of debt after tax=9.34%*(1-32%)=6.3512%
there is no tax benefit for rate on preferred stock, so cost of preferred stock after tax=6.35%
from above, cost of preferred stock is less than the cost of debt after tax, so choose the preferred stock.
the above is answer..
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Cde company currently has a rate on preffered stock of 6.35%
and a ytm on debt...
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...
a. The after-tax cost of debt using the bond's yield to maturity (YTM) is The after-tax...
a. The after-tax cost of debt using the bond's yield to
maturity (YTM) is
The after-tax cost of debt using the approximation formula
is
b. The cost of preferred stock is
c. The cost of retained earnings is
The cost of new common stock is
d. Using the cost of retained earnings, the firm's WACC
is
Using the cost of new common stock, the firm's WACC is
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Tatum can borrow at 6.7 percent. The company currently has no debt, and the cost of...
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Consider a company with a capital structure consisting of 45% debt and 19% preferred stock, with...
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Tatum can borrow at 7.4 percent. The company currently has no debt and the cost of equity is 11.8 percent. The current...
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Consider a company financed with 0.9 equity, 0.1 preferred stock, and the remaining debt subject to a corporate tax rate 0.5 If the required rate of return on the debt is 0.03, on the preferred stock is 0.10 and on the common stock is 0.09, what is the working average cost of capital for this company?
You are looking at the following information: Debt: Common stock: 5,000 6.5 percent coupon bonds outstanding,...
You are looking at the following information: Debt: Common stock: 5,000 6.5 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. 125,000 shares outstanding, selling for $59 per share; the beta is 1.15. 16,500 shares of 5.5 percent preferred stock (review my Ch.8 slide 43: what does "...% preferred stock" phrase mean?) outstanding, currently selling for $107 per share. 7.5 percent market risk premium and 5 percent...
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Aant Investments Inc. currently has $3.5 million in debt outstanding, bearing in interest rate of 12.3%....
Aant Investments Inc. currently has $3.5 million in debt outstanding, bearing in interest rate of 12.3%. It wishes to finance a $5 million expansion program and is considering five alternatives. Plan Debt 0% 35% 50% Preferred Equity 0% 100% 0% 65% 0% 50% 20% 30% 20% 20% 50% 60% so The preferred stock dividend will be 12% and the price of common stock will be $18 per share. The company currently has 750,000 shares of common stock outstanding and is...
a. The after-tax cost of debt using the bond's yield to
maturity (YTM) is
The after-tax cost of debt using the approximation formula
is
b. The cost of preferred stock is
c. The cost of retained earnings is
The cost of new common stock is
d. Using the cost of retained earnings, the firm's WACC
is
Using the cost of new common stock, the firm's WACC is
X P9-17 (similar to) Question Help Calculation of individual costs and WACC Dillon...
Tatum can borrow at 6.7 percent. The company currently has no debt, and the cost of equity is 12.9 percent. The current value of the firm is $595,000. The corporate tax rate is 21 percent. What will the value be if the company borrows $310,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Company value
Tatum can borrow at 7.4 percent. The company currently has no debt and the cost of equity is 11.8 percent. The current value of the firm is $695,000. The corporate tax rate is 25 percent. What will the value be if the company borrows $410,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Value of the firm
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