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Calculate the after tax cost of each of the sources

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Problem 1: The Shocking Corporation is subject to a company tax rate of 30%. The company asks you to calculate the after tax (where relevant) cost of each of the following sources of funds:

(a) Ordinary $1 shares expect the next dividend payment to be $0.102 per share which is expected to grow at a rate of 2% in perpetuity. The current market price is $1.20.

(b) What is the cost of $100,000 in retained earnings?

(c) 10% preference shares of $2 with a current market price of $2.50.

(d) 9% debentures with an issued value of $100, redeemable in four years at $100 with a current market price of $90.90.

Reference no: EM132954182

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