Calculate cost of equity capital and after-tax cost of debt

Assignment Help Financial Management

Reference no: EM132072062

The Company X has the following capital structure in market value terms:

Debt $20.000.000

Preferred Stock $8.000.000

Common Stock (120.000 shares) $32.000.000

The company has a marginal tax rate of 20 percent. Company’s debt is currently yielding 20 percent. The firm pays $5 to preferred stock holders and market price of its preferred stock is $25. Expected dividend for the common stock holders is $15, where the current market price of the common stock is $100. The growth rate of dividends (for common stock holders) has been 10 percent and is expected to continue at the same rate.

a) Calculate after-tax cost of debt.

b) Calculate cost of preferred stock.

c) Calculate cost of equity capital.

d) Compute the firm’s; weighted average cost of capital.

Reference no: EM132072062

Questions Cloud

They need to put into the account today to ensure : how much money do they need to put into the account today to ensure that they will have $120,000 in 10 years?

Considering bidding on government project : Monsoon Inc. is considering bidding on a government project. What is the minimum bid that the firm should submit for this project?

Forward contract value is always equal : Forward contract value is always equal to. The value of any asset is equal to.

Create simple application that gathers personal information : Create a simple application that gathers the following personal information. Use a class named "Person" that holds the properties above.

Calculate cost of equity capital and after-tax cost of debt : Calculate after-tax cost of debt. Calculate cost of preferred stock. Calculate cost of equity capital.

How does the journal article relate to the texas government : How does the journal article relate to the Texas Government course? - Explain how your selected article relates to this Texas government course.

State how answering the issues will help us : The format of your paper will need to follow the following outline in APA format (include title page, abstract page, content pages, and reference page).

What is local net profit margin and operating margin : What is Local's gross margin? What is Local's operating margin? What is Local's net profit margin?

Discuss about SME major job satisfaction : SME major job satisfaction is: Job markets, Job EOE/equity, Job interviews, All the above, None of the above

User Account

All Pages