Calculate cost of debt

Assignment Help Finance Basics
Reference no: EM13255522

Burton Company wants to calculate the component cost in its capital structure. Common stock currently sells for $33, and is expected to pay a dividend of $.40. Burton's dividend of $3.00, and carries a flotation cost of $1.10. Burton's Company bonds yield 7% in the market. Burton's is in the 30% tax bracket.

a. Calculate cost of debt, cost of new common new stock, cost of preferred stock and cost of retained earnings.

b. Calculate the company's weighted average cost of capital assuming that its new financing will consist of 40% debt, 10% preferred stock, and 50% retained earnings.

 

Reference no: EM13255522

Questions Cloud

How many turns are required to produce an inductance of 1 mh : A square cross section, air filled toroid has Inner radius 12 cm. outer radius 14 cm. and thickness 2 cm. How many turns are required to produce an inductance of 1 mH
What will happen to ytm and the bond price : In the bond market, what is the difference between the coupon rate and the yield to maturity? Why are they usually different? After bond issuance, if inflation rate go up, what will happen to YTM and the bond price?
What is the complex power consumed on the previous load : Consider an impedance Z = (1 + j) Ohms. The voltage phasor across it is 1 V. What is the apparent power consumed on this impedance. b-) What is the real power consumed on the previous load.
What is the average sound level for each car : Ten cars at an intersection are blowing their horns simultaneously, What is the average sound level for each car
Calculate cost of debt : Calculate the company's weighted average cost of capital assuming that its new financing will consist of 40% debt, 10% preferred stock, and 50% retained earnings.
Define what percent error results from the assumption : What percent error results from the assumption that the density of water is 1.000 g/ml at 20 C
Find he longest wavelength of light : What is the longest wavelength of light capable of ionizing a hydrogen atom in the n = 2 state
Design the controller and estimator for unit step response : design the controller and estimator so that the closed-loop unit step response to a command input has a rise time tr
Compute the mean, median and first quartile : Compute the mean, median, first quartile, third quartile, range, inter-quartile range for "Age" and construct a box plot and determine whether the data is skewed, if so, how?

Reviews

Write a Review

Finance Basics Questions & Answers

  Percentage of sales method in forecasting

Describe the weaknesses of using the percentage of sales method in forecasting.

  External funding requirement

Your firm, Martin Industries, has experienced a higher than expected demand for its product line. The firm plans to expand its operation by 25% by spending $5,000,000 for an additional building.

  Calculate the present values of investment using future

Calculate the present values of investment using future values investments returns

  Simply respond to market signals of weakness

The emerging market crisis of 1997 to 2002 were worsened because of rampant speculation. Do speculators cause such crisis or do they simply respond to market signals of weakness?

  What is yield to call (ytc)?

Ferris Incs bonds currently sell for $1,275 and have a par value of $1,000. They pay $120 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,120. What is their yield to call (YTC)?

  Highly compensated employees

All the following employees are considered highly compensated employees in the following year EXCEPT

  Determining accuray ipo

Provide a brief description of Accuray, its main business and operational activities and a short synopsis of the main developments of the company over the past 5 few years.

  Computation of the borrowable amount through debentures

Computation of the borrowable amount through debentures and Delaware borrow under a term loan at 13 percent interest without breaching the indenture restriction

  Calculate the annual loan payment

Loan amortization schedule Joan Messineo borrowed $15,000 at a 14 percent yearly rate of interest to be repaid over 3 years. The loan is amortized into three equal, annual, end-of-year payments.

  Describe organization from an open systems perspective

Select an organization to which you have finish access or one about which much has been written. The best reports will be able to make on business or popular press articles.

  Explain the term structure of interest rates

One method used to obtain an estimate of the term structure of interest rates is called bootstrapping. Suppose you have a one-year zero coupon bond with a rate of r1 and a two-year bond with an annual coupon payment of C

  Define the term reserve price

In approximately hundred words, discuss the term "reserve price" and explain how the use of a reserve price can affect the progress and outcome of an auction.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd