Finance Assignment | Professional Writing

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?

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