Individual or component costs of capital

[S052sdr]

Compute the cost of capital for the firm for the following:

A) A bond that has $1000 par value ( face value) and a contract or coupon interest rate of 11.4% Interest payments are $57.00 and are paid semiannually. The bonds have a current market value of $1,121 and will mature in 10 years. The firms marginal rate is 34%

B) A new common stock issue that paid a $1.76 dividend last year. The firms dividends are expected to grow at 6.7% per year, forever. The price of the firms common stock is now $27.31.

C) A preferred stock that sells for $129, pays a dividend of 8.6% and has $100 par value.

D) A bond selling to yield 12.2% where the firms tax rate is 34%

 

[Deleted member 4993]

Compute the cost of capital for the firm for the following:

A) A bond that has $1000 par value ( face value) and a contract or coupon interest rate of 11.4% Interest payments are $57.00 and are paid semiannually. The bonds have a current market value of $1,121 and will mature in 10 years. The firms marginal rate is 34%

B) A new common stock issue that paid a $1.76 dividend last year. The firms dividends are expected to grow at 6.7% per year, forever. The price of the firms common stock is now $27.31.

C) A preferred stock that sells for $129, pays a dividend of 8.6% and has $100 par value.

D) A bond selling to yield 12.2% where the firms tax rate is 34%

What are your thoughts?

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