After-tax cost of debt and cost of preferred stock

Assignment Help Financial Management

Reference no: EM131528834

Consider GRENLEC Power Co. which has the following information about its capital structures:

Debt - 4,500 issues 6 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 93 percent of par, the bonds make semiannual payments

Common Stock - 150,000 shares outstanding, selling for $35 per share; the beta is 1.10

Preferred Stock - 80,000 shares of 6 percent preferred stock outstanding, currently selling for $95 per share

Market Information - 6 percent market risk premium and 4 percent risk-free rate.

Required: Calculate to the following if the company has a tax rate of 36 percent.

i. Total Market Value for the Firm

ii. After-tax cost of Debt

iii. Cost of Equity

iv. Cost of Preferred Stock

v. Weighted Average Cost of Capital

Reference no: EM131528834

Questions Cloud

How leadership enhance employee commitment and motivation : Critically discuss whether effective leadership can enhance employee commitment and motivation

What are the potential revenues and profits for ubertruck : UberTruck entering Vietnam offering Backhauling services. What are the potential revenues and profits for UberTruck in northern and southern regions of Vietnam?

Dealing with financial crisis and economic slowdown : The policy action of government, central bank in particular in dealing with financial crisis and economic slowdown in recent years

Capital budgeting decision would be buying house : For most of us, a capital budgeting decision would be buying a house, which is a purchase with a long-term investment.

After-tax cost of debt and cost of preferred stock : Calculate to the following if the company has a tax rate of 36 percent. After-tax cost of Debt. Cost of Preferred Stock. Cost of Equity

What kinds of proactive activities can an employer undertake : Topic: What kinds of proactive activities can an employer undertake to enhance the regulatory environment

Communication factors as a result of job developments : The literature review topic is - tie it to communication factors/effectiveness as a result of job developments.

What is the company cost of equity capital : What is the company’s cost of equity capital if MJI’s common stock has a beta of 1.0, a risk-free rate of 6 percent and the expected return on market is 12 %

What are the advantages of distributed systems : Define location independence, fragmentation independence, and replication independence.

User Account

All Pages