A company has a capital structure of 50% equity and 50% debt. It just paid out a dividend of $2.28 per share, and the company has $2 million of retained earnings. The dividends are expected to grow at 4.7% per year in perpetuity. Shares are currently 26.4, and the underwriter will charge the issuing expense of 4.4% on the existing share market value. The tax rate is 40.2%.
What is the cost of retained earnings?
A company has a capital structure of 50% equity and 50% debt. It just paid out...
A company finances its operations with 50 percent debt and 50 percent equity. Its net income is I = $30 million and it has a dividend payout ratio of x = 20%. Its capital budget is B = $40 million this year. The interest rate on company's debt is rd = 10% and the company's tax rate is T = 40%. The company's common stock trades at Po = $66 per share, and its current dividend of Do = $4...
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%. If its current tax rate is 40%, how much...
Question 5 (6 marks) Calico has the following capital structure, which it considers to be optimal: debt-25% (Calico has only long-term debt), preferred shares 7%, and ordinary shares-68%. Calico's tax rate is 29%, and investors expect earnings and dividends to grow at a constant rate of 4.7% in the future. Calico paid a dividend of AED 8 per share last year (Do), and its shares currently sell at a price of AED 76 per share. Ten-year Treasury bonds yield 5%,...
Turnbull Co. has a target capital structure of 45% debt, 4% preferred stock, and 51% 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%. If its current tax rate is 25%, how much...
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 its current tax rate is 40%, how much higher will Turnbull's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? If Tumbull can raise all...
Consider the case of Turnbull Co. 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 8.2%, and its cost of preferred stock is 9.3%. If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 12.4%. However, if it is necessary to raise new common equity, it will carry a cost of 14.2%. If its current...
Turnbull Co. has a target capital structure of 58% debt, If its current tax rate is 40%, how much higher will 6% preferred stock, and 36% common equity. It has a Turnbull's weighted average cost of capital (WACC) be if before-tax cost of debt of 8.2%, and its cost of preferred it has to raise additional common equity capital by stock is 9.3%. issuing new common stock instead of raising the funds through retained earnings? If Turnbull can raise all...
3. The management of a conservative firm has adopted a policy of never letting debt exceed 30 percent of total faning. Te f will earn S10,000,000bt distribute 40 percent in dividends, so the fir have S6,000,000 to add to retained earnings. Currently the price of the firm's stock is $50; the company pays a $2 per share dividend, which is expected to grow annually at 10 percent. If the company sells new shares, the net to the company will be...
please help 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 its current tax rate is 40%, how much higher will Turnbull's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? If Turnbull can...