Calculate the after-tax cost of debt

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Reference no: EM1343468

Solve the following problems and be able to discuss them relative to the financial management of a company.

Thress industries just paid a dividend of a $1.50 a share (i.e., D0 = $1.50). The dividend is expected to grow 5% a year for the next three years and then 10% a year thereafter. What is the expected dividend per-share for each of the next five years?

Boehm Incorporated is expected to pay a $1.50 per-share dividend at the end of this year (i.e., D0 = $1.50). The dividend is expected to grow at a constant rate of 6% a year the required rate of return on the stock is 13% what is the estimated per share of Boehm stock?

Nicks Enchiladas Inc. has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock's required rate of return (assume the market is in equilibrium with the required return equal to the expected return)?

Calculate the after-tax cost of debt under each of the following conditions:

a)         rd of 13%, tax rate of 0%

b)        rd of 13%, tax rate of 20%

c)         rd of 13%, tax rate of 35%

Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring floatation cost what is the companies cost of preferred stock?

Booher bookstores has a beta of 0.8. The yield on a three-month T-bill is 4%, and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM?

Reference no: EM1343468

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