Cost of Capital for the Firm Assignment | Homework For You
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 10.4%. Interest payments are $52.00 and are paid semiannually. The bonds have a current market value of $1,128 and will mature in 10 years. The firm’s marginal tax rate is 34%.
b. A new common stock issue that paid a $1.77 dividend last year. The firm’s dividends are expected to continue to grow at 7.4% per year, forever. The price of the firm’s common stock is now $27.73.
c. A preferred stock that sells for $127, pays a dividend of 9.7 %, and has a $100 par value.
d. A bond selling to yield 11.9% where the firm’s tax rate is 34%.
A. What is the after-tax cost of debt?
B. What is the cost of common equity?
C. What is the cost of preferred stock?
D. What is the after-tax cost of debt?Get Finance homework help today