Calculate cost of debt, Calculate the company's weighted

Calculate cost of debt

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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

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